BJ Lackland. He has spent over 15 years as an investor in startups. As an investor, he’s been in VC and Angel and is now the CEO of Lighter Capital, where he oversees over 200 alternative investments in early stage tech companies. As an executive, he’s been on the executive team of 3 companies including CFO of a public tech company called Power Efficiency Corp. He’s raised and uploaded over $150M worth of capital. Famous Five: Favorite Book? – Crossing the Chasm What CEO do you follow? – N/A Favorite online tool? — Cirrus How many hours of sleep do you get? — 4-5 If you could let your 20-year old self, know one thing, what would it be? – “Just keep seeking” Time Stamped Show Notes: 01:20 – Nathan introduces BJ to the show 02:05 – BJ was at VC in the early 2000s for 5 years and focused on energy technology 02:58 – Lighter Capital is a fintech company that revolutionized as a startup finance 03:06 – They are using technology to improve entrepreneurs’ access to capital 03:14 – Lighter Capital’s model 03:23 – An entrepreneur spends 8-10 hours with them before they write a check 03:30 – The revenue-based financing tends to be the best aspect of equity 03:58 – On average, Lighter Capital provides companies $250K and can go up to $2M 04:28 – Pay multiple is 1.5 to 2 times and paid typically over a 3 to 5-year period 04:53 – If the company grows quickly, they can pay in a shorter time period 05:00 – “We have every incentive of trying to help them grow” 05:07 – Lighter Capital is really betting on the entrepreneurs 05:20 – Lighter Capital has raised a total of $120M 05:23 – The initial fund was $20M 05:45 – Lighter Capital is raising from traditional LPs 06:44 – Lighter Capital makes money like a bank does 07:35 – Most lenders are worried about payment defaults 07:44 – Lighter Capital focuses on helping companies grow long-term 08:40 – Lighter Capital has a minimum threshold of $15K a month 08:55 – Lighter Capital looks into 2 different audiences 08:58 – One is their customers 09:01 – The other one is their capital partner 09:14 – Lighter Capital is funding 10-12 companies a month 09:40 – Lighter Capital has a group of 9 developers and data scientists 09:49 – Lighter Capital has 90% accuracy for predicting revenue 10:45 – Lighter Capital still goes through several different factors for approving a company 11:56 – In Episode 421, Nathan had Ceterus who worked with Lighter Capital 12:17 – The payment can or cannot accelerate depending on the company 12:44 – Companies can pay lighter capital earlier with a lesser amount 13:56 – Lighter Capital funded companies that are just by themselves 15:00 – Lighter Capital is also funding similar companies 15:36 – In Episode 542, Nathan had HipLead and on Episode 560, Badger Maps, and they both worked with Lighter Capital 17:34 – Lighter Capital worked with 101 companies last year 17:54 – Lighter Capital closed a lot of deals last Christmas 19:20 – The Famous Five 3 Key Points: Thousands of new businesses are coming out every month; having easy access to capital is a huge advantage for them. Predicting one company’s future revenue is beneficial, both for the investor and the company. Keep seeking, stay curious, and always find new things to learn about. Resources Mentioned: The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences Organifi – The juice was Nathan’s life saver during his trip in Southeast Asia Klipfolio – Track your business performance across all departments for FREE Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible Audible– Nathan uses Audible when he’s driving from Austin to San Antonio (1.5-hour drive) to listen to audio books Freshbooks – Nathan doesn’t waste time so he uses Freshbooks to send out invoices and collect his money. Get your free month NOW Show Notes provided by Mallard Creatives

In-house contracts and public-public cooperation issues under Directive 2014/24/EU iTunesInterview with Willem Janssen, Lecturer and PhD Researcher at the Public Procurement Research Centre of Utrecht University and Twente University. His PhD researches the influence of EU public procurement law on the performance of services by cooperating public authorities and the issues of regulating and enforcing the make-or-buy decision of public authorities. TranscriptThank you very much for accepting to be interviewed for the podcast. You were selected a few months ago to come to the conference but couldn’t join us so it’s great to finally be speaking with you.Exactly. And, I mean, let me begin by thanking you for the opportunity to discuss public-public cooperation with you today. Before we begin, I must say that your podcast series is truly a great project. I think it really personifies what academia is in today’s society. I mean, writing a paper, presenting it amongst peers is simply not sufficient anymore and I think research must be relevant and accessible to society and Twitter, LinkedIn, blogs, they can play an imperative role in that to get your message across. But, truly, your podcasts they take it to the next level and I hope that will continue for a while. I certainly hope so. And I think this series is going to be twenty episodes long, this is the last one, but thank you very much for the very kind words as we start the podcast. So let’s talk about in-house contracts. Why do you think discussing in-house contracts is important?Truly, like what I said just then, it’s I think the perfect question to kick off our talk today. as I said, I believe the ‘why’ question is very important and the debate on the in-house doctrine and more particularly public cooperation is important for a number of reasons. But, maybe before we delve into more detailed conversation about the particularities of the Court’s jurisprudence or their codification in the 2014 directives, perhaps it’s good to first briefly outline the basics of this doctrine, which is quite technical, but if you’ll allow me, I will aim to briefly sketch their contours. Of course.I think it’s important to consider that the basic notion of the EU public procurement rules is that they’re only applicable if a contracting authority awards a public contract to a separate entity. Now, this means that a contracting authority itself is always allowed to provide services with its own departments. Now, this type of delivery falls outside the scope of EU public procurement law and outside of the treaties. This would for instance be an IT department of a municipality that creates and maintains its own digital infrastructure, or a waste management department of the same town that picks up your bag of rubbish every Monday morning.Now, where it becomes difficult though is when things aren’t as straightforward anymore as these situations, so the question really is, and that’s the question that the in-house doctrine raises, how do these rules apply within the public sector when contracting authorities decide to work together for the delivery of their tasks? And this is, I think, where the in-house doctrine starts. It all begins with considering that there’s no express exemption for contracting authorities that want to provide services in cooperation with others. This means that the rules on transparency and equality that we hold dear in the public procurement directives in principle apply to contractual agreements between two contracting authorities or between a contracting authority and a, for instance a privatised authority which was previously part of the contracting authority itself. Now, this also doesn’t mean that all of these contractual agreements are public contracts that must be put up for tender. Even if they qualify as a public contract they can be exempted from a duty to tender. And I think, it’s important to briefly touch upon three of these alternatives that can exempt a public contract from this duty. The first one is the oldest possibility to do so is to grant an exclusive right to another contracting authority. This is currently vested in Article 11 of the new directives. Now, I won’t go too much detail on this but I mentioned it because it was the inapplicability of this exemption in Teckal in the year ’99 of the last century that made the Court of Justice decide to lay the foundations for the in-house doctrine. In this case, the applicable directive on supply contracts did not contain an exclusive right exemption at the time, which did exist in the directive on public service contracts, but as a consequence the Court decided to introduce two criteria, which would deem the award of a public contract exempt from the scope of EU public procurement law. Now, on the one hand, the awarding authority has to exercise control over the receiving entity. This control has to be similar to the type of control, which it exercises over its own departments. I think this is where you clearly see the link with the discretionary power of public authority to provide services with their own department and, on top of this control criterion, the controlled entity also has to perform the essential part of its activities. So I suppose briefly said formal independence must be trumped by practical dependence. A person at a conference once said “just like the Spice Girls, When Two Become One”. [Pedro laughs] So since then numerous cases before the Court have further clarified these two criteria and I believe what has caused a lot of confusion is the different names that it has gotten. It’s been called quasi in-house, vertical cooperation, or institutionalised exemption. Me myself I prefer ‘institutionalised’ as it actually shows that the cooperation is institutionalised in a separate entity, but I suppose that’s really your own preference.Now, I’ll quickly go onto the second, or the third really, exemption, or the second exemption that was created by the Court in 2009, when it was faced again with a scenario where it deemed these Teckal criteria inapplicable, but it decided to introduce another type of exemption, in an infringement procedure of the Commission against Germany. Now, in this case, the Court ruled that a contractual agreement can be exempted if the cooperation between contracting authorities which does not rely on a separate entity is governed by considerations and requirements relating to the pursuit of objectives in the public interest and that the principle of equal treatment is respected so that no private undertaking is placed in an advantageous position when compared to its competitor. Now, this has since been referred to as the non-institutionalised exemption or horizontal cooperation.So, I think, these are the basics of the in-house doctrine and now to get back to your question after what I realise was a fairly long introduction. So, why is it important to discuss these exemptions and why is it a good development that this line of case law has been codified in the directives? Well as I said, there’s a couple of reasons I think. I believe the societal relevance of efficient and effective service provision by contracting authorities which aims to ensure that best value for money is achieved is probably the most important one. I mean this means that rules should enable cooperation on the one hand and ban it if a public contract should be tendered in light of the internal market. Value for money is not one of the directives of the directive and as you said public-public cooperation contracts are not covered by public procurement law because technically there’s not a contract being awarded, so not going to the market?No, exactly. You’re absolutely right. I totally agree that on the European level the directives focus on achieving the internal market, however on the national level we do have to deal with these type of arrangements and that they do limit to some extent what contracting authorities can do for society or how they organise their service provision. So, I suppose yes, on a more dogmatic level, I completely agree with you, however on a national implementation level we’re still faced with national goals which are often to achieve best value for money. That’s true.Yeah. So, I think, the second reason is that there’s a strong regulatory dilemma, and I suppose that also comes back in what I just previously said, is that in EU public procurement law and the in-house doctrine we aim to strike a balance between on the one hand allowing service provision by contracting authorities who wish to cooperate for the provision of services, and on the other hand we try to achieve the main objective of this field of law like you just said which is to create an internal market for public contracts.So clarity is very important for that and I think that has often lacked in practice, which is particularly troublesome if we look at the Court’s move to apply these exemptions to other subject matters such as concessions or perhaps even more in the future to limited authorisation schemes. And this is I think why I also welcome the codification of the in-house doctrine in Article 12 which in itself should be seen as a milestone of EU public procurement law and all of this is even more relevant when we consider that we’ve seen a rise in the popularity in many EU member states of these type of cooperations which are often in the form of shared service centres or other types of cooperations. Going into the directive 2014/24, why do you think that the codification occur and why do you think that we have so many exemptions on Article 12 nowadays?Yeah, that’s a great question actually. I love looking at the sometimes ungraspable regulatory part of the EU. And sometimes things happen for no reason I think. Sometimes they do fortunately but what’s interesting here though is that, what is very clear is that from the start of the reforms of the internal market from say 2010 when former EU Commissioner, Monty at the time, placed public procurement at the centre of his vision for the future of the single market. The new framework was aimed to improve the efficiency of public spending by simplifying the existing rules and aimed for further flexibility when applying them and I think in light of this it was the legislature of that deemed it important to clarify that the rules were applicable to in-house procurement but what we see in the expansion of these exemptions is that it’s driven by a strong call from contracting authorities all over the EU, who clearly found their way to the Commission and to the European Parliament who wanted more flexibility and space to provide services together. And I think that’s what mostly caused these exemptions to expand. So changed in terms of public-public cooperation between 2004 and 2014? Because if you look at the way that public-public cooperation is included in the new directive is very different from what we had in 2004, so what do you think changed between these two sets of directives?So, when they were attempting to codify the Teckal ruling in 2004 it failed obviously. We do now have the inclusion of Article 12 as something unique, in the sense that we didn’t have it before, but of course we had the exclusive right exemption. But perhaps this attempt failed at the time, because either the member states were not able to construct a common wording for this exemption as there had not been a lot of clarifications from the Court following Teckal and, I suppose, this can be explained again by the organisational differences between public-public cooperations across the EU. It would be great actually if everyone did things in the same way which means that making legislation would be a lot easier but, unfortunately, and I suppose luckily we’re not faced with that reality. On the other hand, the European legislature may have been hesitant like I said before to codify the jurisprudence at a stage where many questions and issues had not been decided upon. So, what changed afterwards? Like I said I think the emphasis of public authorities in their role of contracting authorities wanting to jointly provide services grew substantially and I think because of that the boundaries of EU public procurement law also became more visible. And I suppose it made contracting authorities and competitors on the market who filed proceedings before the Court more aware of those limitations and with that came the call for more flexibility and legal certainty. And this is interestingly enough also reflected in the case law of the Court of Justice. The Court was very hesitant to accept any of the cases put before it until 2007 when a clear turning point was visible in Tragsa and Coditel when the Court became more willing to accept and expand these exemptions. Now, in the past, it’s been argued that this was partly due to the recognition of regional and local self-governance in the Lisbon Treaty. Of course, this is one example of how strongly the EU is changing and that there’s not so much the EU level, or the member state level anymore, or the level of public authorities, but it’s recognising that national administrations are very complex and that we do have a local and a regional level that is also very important and has a say when it comes to codifying or making legislation. Where do you stand in the argument about accepting or not private capital in public-public cooperation contracts under Article 12, Paragraph 3, in other words are you siding with the Court of Justice in Coditel or Stadt Halle?I think, private capital, out of all the criteria that the Court has introduced, is probably the most interesting. I mean, this is really where the state, the market and their relationship really becomes visible and you can clearly see how the Court is struggling to deal with this.Now, it’s fair to say that the Court has been very hesitant towards private capital and that is somewhat justified. The absolute ban provides absolute legal certainty which is interesting and has some benefits because yes there are risks involved when including private capital participation as the objectives of such parties can be different which would mean that control cannot be exercised anymore, and on the other hand it might favour these undertakings over their competitors which appears to prevent any type of state aid.However, I do question whether an absolute ban is justified and completely necessary, particularly if one considers the practical and financial need for private capital investments that are very often necessary to be able to provide services at a certain level. And also state aid law if you compare it with this other field of law is generally not as strict. I mean, it requires an assessment of exemptions, even if state aid is found it can still be justified, so this means that I see possibilities to introduce a different approach which would be a presumption of diminished control. So, the existence of private capital would presume that control is diminished and I suppose the subsequent relevant question would then be if this means that decisive control is lost.Now, this was something that was also advanced by the Advocate-General in Stadt Halle. And this different approach would not necessarily exclude private majority shareholdings but, in that regard, it is unlikely that the minority private holdings would be able to ensure decisive control over an entity. And, I mean in this respect, the higher the level of private participation the more unlikely it would be that control could exist. And it’s not just the actual percentage, I think that should be taken into account after having assessed the applicable national legislative framework, which would need to be considered as that can differ amongst member states in relation to the rights that types of shareholdings give shareholders in practice and if these rights are substantial, which can for instance be the case with veto and blocking rights, decisive control would be unlikely to exist. And, in addition to national legislation, the assessment would also need to include some of the practical determinations of rights in the statutes and overarching agreements which distribute these rights of shareholders and extend the limits of their rights.So then, if we look at the new directive what’s interesting that the Court is, or the Court, I should say the legislature has in fact done all of this but only for a very limited amount of situations. And this is where only direct private capital can be allowed if it concerns the non-controlling, non-blocking forms of participation which are required by national legislative provisions and conform too with the treaty, and remarkably, which do not exert a decisive influence over the controlled legal person. So, really, what the legislature has done is just introduce this idea in a very small, on a very small scale particularly because it requires this participation to be required by national legislative provisions. I mean, I haven’t checked all of the states but so far what I’ve seen is that a very limited amount of countries, I think particularly France, would be able to benefit from this exemption but in the Netherlands we sure won’t be able to use this exemption.So, what I’m trying to say, I think the approach of the Court is understandable, but there are certain ways that we can improve this test, particularly if you consider that the whole control test of institutionalised exemption is on a case-by-case approach and to reject private capital to that extent is maybe a bit extreme. I have to say that on this occasion I think I’m on the extreme side in terms of rejecting private capital, at least where I stand now. The reason for that being that if we allow private capital to benefit from a public-public cooperation contract or services that is being performed, effectively we are allowing someone in the market, in the internal market to benefit from public money, not as state aid but as service provider or at least by owning a part of a service provider that is providing services for the public good for example. But in that sense in my view we’re no longer talking about public-public cooperation, we’re talking about something that involved private capital and as such at least that provision of capital should be subject to EU public procurement rules. Not because them joining the cooperation will in itself generate any public procurement but because at the tail end of the services that are going to be provided effectively we’ve got the procurement or service that is being provided by the state in one way or another. So if we don’t do that the consequence is, and that’s what I fear about this field, the consequence will be that companies will understand that in certain sectors it may be easier to actually get in into those projects this way instead of actually trying to win them outright as part of public procurement contracts and public procurement competition and that may lead to regulatory capture, that may lead to very close relationships between certain economic operators in the state and I’m not sure in my view and from my perspective that we would be much better off in the end. So I’m a little bit cagey about allowing private capital to be allowed into a public-public cooperation so I fully understand why we should have this exemption in terms of allowing contracting authorities to cooperate, I mean that should be obviously the case, but I’m more and more reserved and I’ve got more reservations about allowing private capital in in these projects. Because even if you apply let’s say the control test, even if you say that the economic operator, the private element of the public-public cooperation contract does not have a control, what if if you have an arrangement where let’s say most of the profits are derived from that public-public cooperation for the private contractor, you don’t have any control, just the terms of the agreement? You raised some very valid points I think. When I started answering your previous question, what makes it so difficult is when you start mixing public money with private interests and I totally agree with all the points you raise. What I think is going to be very difficult for future things to come, let me just say I think what’s happened now in the directive to allow for private capital only in certain situations I think that’s very inconsistent. I mean it shows that there wasn’t really a vision behind implementing such a thing. I think it’s clearly been put in by one, or a couple of member states, that wanted to benefit from this so, but if you then consider more broadly on what the benefits of private capital could be for the performance of or the realisation of certain projects I think still that the Court’s approach is too strict. And I think some of the points you raised, I mean, if the benefits or if the disadvantages of including private capital are really that strong there’s always the option to tender that type of capital participation to still create some type of competition to open it up to the market, so actually the participation would still be in need of obliging with the public procurement rules which I think would solve a lot of the issues that you raise. But there’s no obligation in doing that. So there’s no obligation in privatising, because effectively you’re talking about a partial privatisation of a service, there’s no obligation in tendering. And I agree with you in that I think that’s one of the limitations we have in terms of public procurement rules is yes public procurement only deals with actually expenditures or expenses made by the state, so buying something, it does not deal with public-private relationships that may influence internal market if what is happening is money coming in the other direction, so money coming into the state.No, it just makes me realise how interesting public procurement really is, I suppose. Because we are fortunate enough to be practicing in or studying a certain field of law that touches upon so many interesting subjects in society even though the actual content of public procurement procedures as such and their focus is sometimes limited and, but it does touch upon a lot of other fields of law, a lot of societal relevant issues which makes it very exciting to go to work every day I find. One final question. How can we solve the legal uncertainties arising from Article 12, Paragraph 4? So what would you do to improve Article 12, Paragraph 4 of the directive?Ooh, you’ve left the biggest and toughest question for last! [Laughter] I think there’s a lot of people that have looked at this exemption, a lot of people have discussed it and it’s still a very difficult exemption to grasp. And, I suppose, the newly introduced activities criterion appears to be the least troublesome, but it’s mostly because of the use of terms such as ‘public services governed by considerations relating to the public interest’ that cause difficulties and leaves open much room for interpretation. And because these terms differ with regard to national and cultural traditions or at least the way it’s been defined over the years, it’s nearly impossible for the Court to give a clear-cut answer.Now, I think that practical cases before the Court will undoubtedly still clarify these criteria but only on a case-by-case basis, such as what happened when the Court clarified that cleaning services were not in the public interest in the case of Piepenbrock. But still, there’s a lot of open questions in this regard which I hope that the Court will address in the future. So say for instance the Court used to emphasise that no private provider can be placed in a position of competitive advantage and we cannot find this anymore in the codified criteria so it can be questioned what the actual relevance of this still is. And, more specifically, I think, and that’s where a bit of fundamental reasoning lacks, is how a cooperation, or at least I wonder, which can have private capital participation in the participating bodies and which is active on the market for 20% of its activities can still be governed by considerations relating to the public interest?It’s a very difficult question and let’s hope that the cases before the Court will come, actually address some, and there’s more of these, uncertainties. And generally speaking, more attention should be paid in Europe on the European level and on the national level to identify the type of services that can rely on these exemptions, or at least how we come to a conclusion that something is in the general interest. This is a very old debate but it’s still so relevant as we still find it in much legislation.I think, on a more broader level, the potential extensive application of these exemptions in practice raises more fundamental questions of how we approach the in-house doctrine. Mostly because the focus of these exemptions has always been of an organisational nature, how a service is organised depicts the influence of EU public procurement law. This would bring me to my push to have more attention to the phase prior to procurement in which a public authority decides which type of services it deems best for society as that is where the economic and societal relevance lies. And don’t get me wrong, this is a very difficult area to think about regulation, to think about enforcement, to think about how do we improve this, and I think this is also partially why it’s currently a national matter. It’s often left still unregulated also on the national level but definitely on the EU level because it delves so deep into the roots of the organisation of many member states. Article 345 of the Treaty, the Protocol (nr. 26) on services of general interest, recognise firmly that national member states have held the discretion to define these services. But, nonetheless, the effects of in-house performance on the market are not necessarily taken into account very often. Innovation, sustainability can be hampered by in-house performance, but it can also be advanced by in-house performance. And what’s probably even more predominant and important from a legal perspective is that third parties have no say in this decision making process before procurement or in-house performance occurs, whereas their interests are often affected by the internalisation of a public contract which means there’s a lack of foreseeability as well.Okay. I think that’s a great way to end the programme. Willem, thank you very much for accepting the invitation to come to the show and for the last half an hour.Perfect. It’s been an absolute pleasure. Good luck with the rest of the series. Thank you. You can find me at my blog Telles.eu or on Twitter where I use two handles, @Detig for general discussion and @publicprocure for public procurement related topics. As ever I’m very grateful for the support of the British Academy Rising Star Engagement Awards which made this series possible.

Jo Murray is a facilitator and change consultant with a Masters in Positive Psychology from Melbourne University. Jo is specifically interested in how leaders in organizations can use the concept of psychological capital to improve the engagement and wellbeing of their employees. While your organization may measure and track your economic, human or even social capital, have you ever considered the psychological capital? Psychological capital is about understanding what individuals uniquely bring to their role and the organization to give it life and vitality, and their potential to be great and perform at extraordinary levels. By providing meaningful and productive feedback to your staff based on the components of psychological capital - hope, self-efficacy, resilience, optimism - you can unlock the performance potential of your team. You’ll Learn: [01:33] - Jo explains that psychological capital is simply described as the notion of who you are and, more importantly, who you’re becoming. [02:44] – As an organization leader it means tapping into when your employees enjoy their job, are motivated and optimistic about improving their performance. [03:36] - People who are higher in psychological capital are more engaged, involved, and rewarded by the work they do. [04:27] - Jo explains how psychological capital is the dynamic interplay between hope, self-efficacy, resilience, and optimism (HERO). [08:10] – You can use these four elements of psychological capital by firstly becoming conscious of what you’re doing as a leader and then using as a basis when you manage performance or provide feedback to your staff. [09:53] - Jo shares her experiences and thoughts on how organizations can introduce the practices of psychological capital into workplaces. [12:04] - Jo talks about the importance of understanding why and being ready to introduce the concept of psychological capital into an organization. [14:50] - Jo shares one example of introducing psychological capital into a challenging workplace and the benefits of providing feedback in a meaningful, productive way that actually unlocks performance. [17:34] – Jo explains how you can find more information on psychological capital and learn how to introduce it into your workplace. [18:46] - The Lightning Round with Jo Murray. Your Resources: The Gifts of Imperfect Parenting: Raising Children with Courage, Compassion, and Connection - Brené Brown Practicing Positive Leadership: Tools and Techniques That Create Extraordinary Results - Kim Cameron Flourish: A Visionary New Understanding of Happiness and Well-being - Martin E. P. Seligman How to Be a Positive Leader: Small Actions, Big Impact - Jane E Dutton and Gretchen Spreitzer Thanks for listening! Thanks so much for joining me again this week. If you enjoyed this episode, please share it using the social media buttons you see at the bottom of this post. Also, please leave an honest review for the Making Positive Psychology Work Podcast on iTunes. Ratings and reviews are extremely helpful and greatly appreciated. They do matter in the rankings of the show, and I read each and every one of them. And finally, don’t forget to subscribe to the show on iTunes to get automatic updates. It’s free! Special thanks to Jo for joining me this week. Until next time, take care!

Support the show, consider donating: BTC: 1CD83r9EzFinDNWwmRW4ssgCbhsM5bxXwg ETH: 0x8cdb49ca5103Ce06717C4daBBFD4857183f50935 A topic which is often discussed is the limited use of Ethereum applications without stable cryptocurrencies. Prediction markets are a prime example of this. When one makes a prediction using Ether, he or she is in fact entering into to speculations: one being the outcome of the actual prediction, the other being the price of Ether when the prediction resolves. Projects like Maker DAO try to solve the problem by developing complex systems to ensure that a blockchain token keeps its value in sync with fiat currencies. But Decentralized Capital is taking a different approach by issuing fiat-pegged tokens on Ethereum that are backed by bank deposits. CEO Alex Wearn joined us to explain their approach to providing a fundamental piece of Ethereum infrastructure. Topics covered in this episode: The problem Decentralized Capital is trying to solve
What the architecture of Decentralized Capital looks like
The relationship between Crypto Capital and Decentralized Capital
Why the ability of freezing and confiscating assets is required
Some of the best use cases for Decentralized Capital
The regulatory environment of Decentralized Capital
The Decentralized Capital business model Episode links: Decentralized Capital Website Decentralized Capital is Live article Introducing Decentralized Capital Video Decentralized Capital and Dapp Integration Compliant Decentralized Exchange IDEX Decentralized Capital's DVIP Memberships This episode was hosted by Brian Fabian Crain & Sébastien Couture, and is availble on YouTube, SoundCloud, and our website.

Don't forget to take the Unchained Podcast survey! http://surveymonkey.com/r/unchained Blockchain Capital's recent BCAP token offering is a harbinger of things to come in venture capital and private equity, says the firm's managing director Brock Pierce. And Stan Misohnik, the CEO and cofounder of a new investment bank focused on cryptocurrency called The Argon Group, seconds that. Pierce talks about how his career in cryptocurrency started with video games, how Blockchain Capital's three funds have evolved over time, why he is taking the step to disrupt himself, and why his phone number is being handled by the office of T-Mobile's president. And Miroshnik explains how his background in capital markets helped him see the business opportunity and why the BCAP token issuer was based in Singapore. Show notes: http://www.forbes.com/sites/laurashin/2017/04/18/this-vc-is-sure-venture-capital-is-about-to-be-disrupted/ Blockchain Capital: http://blockchain.capital/ The Argon Group: https://argongroup.com/ Blockchain Capital III Digital Liquid Venture Fund: https://blockchaincapital.tokenhub.com/ The phone hijacking article Brock and I reference: http://www.forbes.com/sites/laurashin/2016/12/20/hackers-have-stolen-millions-of-dollars-in-bitcoin-using-only-phone-numbers/ The episode with Jerry Brito and Peter Van Valkenburgh of Coin Center: https://www.forbes.com/sites/laurashin/2016/10/18/how-coin-center-is-helping-define-the-big-fuzzy-gray-area-of-blockchain-and-cryptocurrency-law/

"We set out to solve an enormous technology question. The technology risk on day one was very high. To some extent, it wasn’t very rational..." - Dave Sanderson (Tweet)KFL Capital Management is setting out to do something every financial team on earth dreams about...The ability to predict the future.Or at least get it right fifty four percent of the time.Our next guest on Top Traders Unplugged is the CEO and Co-Founder of KFL. In this episode we explore their trading strategy and uncover the fundamental differences between what they are doing that makes them so different from traditional alternative investment organizations.Thank you for listening in on our conversation with, Dave Sanderson.Subscribe on: In This Episode, You'll Learn: The value of Battle of the Quants - Hosted by Bartt C. Kellermann Transitioning from commercial litigation to wholesale mutual fund vending"There is something intuitively intriguing about the investment business." - Dave Sanderson (Tweet) How Dave Sanderson was exposed to alternative investments in the first place"We’re really a data science firm." - Dave Sanderson (Tweet) The convincing required to get top big data scientists to work on financial challenges The comical story of how carefully big data scientist come to conclusions What Dave Sanderson loves to do when he isn’t working directly on KFL Capital Management How Dave Sanderson sees the deviation between machine learning and systematic trading What it means to exist in a deluge of big data How Dave Sanderson and KFL perceive themselves and the usefulness of labeling Is machine learning a superior method than conventional approaches to trading? About the choice of Krystal as a name for their fund The structuring challenges behind KFL Capital Management and why they are more like a tech firm"We’ve had a level of communication with our shareholders that’s probably very unique." - Dave Sanderson (Tweet) The focus for expanding KFL Capital Management About evolutionary computing and how KFL Capital Management grows with the markets"We retrain the model every single day. So the model is using more and more information as its training data." - Dave Sanderson (Tweet) Is there an environment which would be optimal for Krystal? Is there an environment which would be severely challenging for Krystal? The use of non-parametric modeling and why this type of prediction takes KFL out of most conventional finance sector buckets Plus much more...Resources & Links Mentioned in this Episode: Attend Next Year’s 10th Anniversary of Battle of the Quants. Learn more about the team behind KFL Capital Management. Man AHL - Dave Sanderson’s initial exposure to alternative investment. Thomas K. Hunter - “He’s probably done more tech deals than anybody in Canada.”This episode was sponsored by Swiss Financial Services:Connect with KFL Capital Management:Visit the Website: www.kflcapital.comCall KFL Capital Management: +1 (416) 849-1925 x212E-Mail KFL Capital Management: Info@KFLCapital.comFollow KFL Capital Management on Linkedin"Unless he could prove it, from mathematical first principles, he wasn’t going to believe it. It’s like the physicist who says, ‘Sure it works in reality, but can you prove it in theory." - Dave Sanderson (Tweet)

"It is important to have some tail hedges in the portfolio. We are basically long forward starting variance, again dealing with variance swaps, long six month variance swaps and short three month variance swaps. Basically what this leaves us with is a long Vega position. If markets collapse overnight, this position should generate a very positive P/L." - Roman Lutz (Tweet)How would it feel to identify trades no one else you know is looking for?Our guest is back and this interview is all about carry trades, mean reverting environments, merger arbitrage, volatility arbitrage, tail hedges and how to become the best trader possible. It's quite likely there is something in this interview which will help propel you forward as a hedge fund manager or in your research of managers.Welcome back to the second part of our interview with Chief Excutive Officer of Future Value Capital, Roman Lutz.Subscribe on iTunes, Stitcher Radio or TuneInIn This Episode, You'll Learn: Simple Models used by Future Value Capital to implement trend following How they utilize carry trades The third area of models: Tail Hedges Learn about how to carry potentially large value variance swaps while keeping the premium for holding them down"In a mean reverting environment as we have seen over the last couple of years, you lose on the momentum strategies, you lose." - Roman Lutz (Tweet) Where the variance exchange swaps derive from whether from OTC with counterparts or constructed using exchange listed products Learn about Credit Support Annex (CSA) Risk management procedures at Future Value Capital The purpose for tactical asset allocation meetings and the decisions that are made The common performance drivers and if there is a dominant part of the portfolio that is responsible for the performance How Roman translates the complex trading strategy of Future Value Capital to investors How Future Value Capital implements trades and why they consider it a key strength of their program"Most strategies have non-normal distributed returns. If they appear to have normally distributed returns, we've probably missed something." - Roman Lutz (Tweet) How much AUM would be optimal running the program or if the potential is unlimited How to create certainty around the risk Future Value Capital holds and how they define that risk What Roman Lutz considers to be one of the riskiest thing that could happen in the financial system What to expect in terms of returns and drawdown when investing in Future Value Capital How to realize when a model is no longer working Personal habits that contribute to Roman's success in managing a hedge fund Plus much, much more..."I actually take much more away from meetings where I get challenged." - Roman Lutz (Tweet)Sponsored by Swiss Financial Services and Saxo Bank:Connect with Future Value Capital:Visit the Website: www.futurevaluecapital.comCall Future Value Capital: +44 203 008 7292E-Mail Future Value Capital: info@futurevaluecapital.comFollow Roman Lutz on Linkedin"Passion, common sense and patience are the key things for becoming a Top Trader." - Roman Lutz (Tweet)

"When you build short term trading models, it's all green-field research." - Karsten Schroeder (Tweet)Through courage and vision, Karsten Schroeder co-founded Amplitude Capital as a pioneer in the CTA industry.Why pioneers? Because they focused on short term trading.In this episode of Top Traders Unplugged, Karsten and Niels discuss Amplitude Capital's scientific approach to Amplitude Dynamic and Amplitude Klassik. These are the two short-term rule based trading programs that Karsten and his team run to invest billions of dollars on behalf on a small group of institutional investors.Thank you very much for listening to this episode with the Executive Chairman of Amplitude Capital, Karsten Schroeder.In This Episode, You'll Learn: The founding story of Amplitude Capital About the motivation source for choosing short term trading On the essence of a great company: The Team"There is a negative notion to the word 'change', that's why we prefer the word upgrade. Upgrade means you do, more or less, the same that you were doing before but in a better way." - Karsten Schroeder (Tweet) Describing Amplitude Capitals' Trading Programs: Amplitude Dynamic - A two day holding period, short term CTA program that trades all asset classes (currently trading app. $1 billion.) Amplitude Klassik - 8 day holding period program, with less reversion models than Dynamic (currently trading app. $600 million.) The scientific processes guiding Amplitude's perception of the markets How Amplitude manages their in-house and outsourced business processes"As important for an investor to choose the right fund, as important it is for the fund to choose the right investors." - Karsten Schroeder (Tweet) Where the point of optimal capital under management is for Amplitude Capital A bird's eye view of their historical track record and their reaction to the market shift in 2009 On the effects of quantitative easing and other government interventions in market health"When you evaluate businesses today, I think it's so much more down to the team than to the original idea." - Karsten Schroeder (Tweet) Model decay and how to best deal with it The design structure of Amplitude Capital's Programs Market dynamics and where the Amplitude programs trade"Having markets that face interventions is not healthy." - Karsten Schroeder (Tweet) Differing philosophies: market specific models vs. models for all markets Comparing mean reversion models (counter trend models) vs. trend following models Plus much, much more...Resources & Links Mentioned in this Episode:Karsten's also participated in the Battle of the Quants Sponsored by Swiss Financial Services and Saxo Bank:Connect with Amplitude Capital:Visit the Website: www.ampcap.comCall Amplitude Capital: ++41-41-747 15 00E-Mail Amplitude Capital: z@ampcap.comFollow Karsten Schroeder on Linkedin"The first couple of years were really, really tough because I remember I was doing so many meetings pitching this to all types of investors around the globe." - Karsten Schroeder (Tweet)

In Today’s Podcast we cover how to harvest long term capital gains tax free. Friday Roundup 7 Review of Monday’s episode with Jeremy from Go Curry Cracker Brad and his family just visited Washington DC for the weekend and used Chase Ultimate Rewards points to stay at the Hyatt Place National Mall Brad’s trip to Walt Disney World with his family, parents and in-laws Jonathan now understands harvesting capital gains and losses after the episode with Jeremy Unconventional choices: Jeremy and Winnie haggling at the farmer’s market near the close of business. Brad going to Disney World before Molly turned 3 so they could get her park ticket for free. Jeremy taking his son on a flight the day before he turned 2 so he could be a lap child on a business class flight Quick hit takeaways from the Jeremy episode: He told his mom he had a ’60 year emergency fund’; he opened a Roth-IRA for his son for earned income on the website. The power of having money and financial independence enabled Jeremy to walk out of his job instead of doing something that he didn’t want to do. Brad’s story of when he left his job and taking the power back from corporate America Investing philosophy and the importance of taking your brain out of financial decisions His financial freedom clock started when he ‘got to broke’ and paid off his student loans Capital Gains Harvesting | Avoiding long term capital gains tax Case study: Married couple with one child. 30 years old. $120,000 of income and maxing their 401k ($36k in total) Qualified dividends and long-term capital gains are taxed at 0% if you’re in the 10% or 15% marginal tax bracket Understanding how marginal tax rates work for income taxes The definition of FI: having 25 times your annual expenses saved up and invested The long term capital gains tax The long term capital gains tax defined & explained How the Roth-IRA conversion ladder would work for this couple and how they can harvest long term capital gains tax free by using advanced FI techniques Itunes reviews and questions from the community Reader case study from Kevin: How to work with a spouse from an ultra-wealthy lifestyle and bring them over to the FI lifestyle Find what makes you happy in life and what you value and spend accordingly Kevin’s scenario is almost exactly like our case study on this episode Travel Rewards question: How to maximize hotel points with Hyatt and Starwood hotels What’s coming up on ChooseFI: JL Collins talks about the Stock Series, the Stapes of FI, JD Roth and Kristy from Millennial Revolution, the true cost of car ownership Links from the show: Podcast episode with Jeremy from Go Curry Cracker Hyatt Place Washington DC National Mall How to take a nearly free trip to Disney World with rewards points from Richmond Savers Personal Capital signup link – free net worth and financial tracker JL Collins’ Stock Series Podcast episode: Travel Rewards points Hyatt House Emeryville, CA Recommended Content Introduction to Free Money Part 1 of the Never Pay Taxes Again series

"In 2008, during the financial crisis, I realized that the hedge fund industry had a significant problem. The problem was, and still is, many hedge funds don't deliver what the client expects them to deliver." - Roman Lutz (Tweet)Can you implement well established hedge fund strategies in a systematic way?Future Value Capital has been researching this for years, before they started trading. They are unique because of how they simplify and automate complex Risk Premia.But we aren't the best at explaining their systems. Roman Lutz, the Chief Financial Officer of Future Value Capital will explain it all in the interview.Thank you for downloading the nineteenth episode of Top Traders Unplugged.Subscribe on iTunes, Stitcher Radio or TuneInIn This Episode, You'll Learn: About Merger Arbitrage and How investors can Profit What criteria they look for in mergers, such as Market Cap, Deal Size, Liquidity etc. What currency markets Future Value Capital enters The app. 15 strategies they use and how many sub strategies they may have"The whole CTA space embraces the concept of uncorrelated returns and liquid investments quite well. Then I thought, 'it's probably interesting to develop other alternative investment strategies besides trend following in a systematic way.' Then I basically discovered this whole world of alternative risk premiums." - Roman Lutz (Tweet) The origin stories of where the Future Value Capital strategy derived from. Understanding the typical way to build a derivative business Why the average correlation of a hedge fund with equities has shifted from 0.6 to 0.9 from the 1990's to today. How Scottish Whiskey tasting can kickstart long term business relationships"We just want to deliver clients what they expect from an alternative investment. That's what our passion is." - Roman Lutz (Tweet) The power of systematic trading: Taking the emotions out of investment decision making The power to trade a large number of different markets The capacity to test your systems for past market conditions Addressing the "Black Box" label that many systematic programs has What environment Future Value Capital's systems are best suited to operate within The business structure of Future Venture Capital and the alliance with Trium Capital"One thing which is very powerful about investments into systematic systems is it takes emotions out of the investment process. I think this is very important.." - Roman Lutz (Tweet) About the post Madoff and additional regulatory environment investors are operating in How Roman Lutz developed the shared business management and split the overhead cost with other emerging fund managers The negative side effects of sharing hedge fund management business practices with other firms A ballpark figure for the cost of being part of the Trium Manager Alliance and get the services required to be able to operate as a regulated and well run firm"We think implied volatilities are actually a very bad indicator for future realized volatilizes. But what it a much better predictor is realized intra-day volatility." - Roman Lutz (Tweet) How Roman and partners develop new plans in regards to where the economy is going and how to develop plans to manage funds going forward How merger arbitrage and volatility arbitrage connect implied and realized volatility How to buy realized volatility When to deploy and when not to deploy the realized volatility trades (when volatility starts to trend) Main categories from a strategy point of view - Trend Following for example How Future Value Capital uses trend following Plus much, much more...Resources & Links Mentioned in this Episode:Listen to the past episode with Marty Bergen from Dunn Capital mentioned in regards to the higher correlation between traditional alternative investment space and the traditional assets.Lars Jaeger owner of Alternative Beta Partners -...

"I don't think that anything you can read in a book will work in the sort term trading space." - Karsten Schroeder (Tweet)Welcome back to Top Traders Unplugged. On this episode Karsten and I discuss the systems and implementation that has led Amplitude to such remarkable success. As the interview comes to a close, we learn about Karsten's philosophy of success and entrepreneurship. Despite being based outside the global financial hubs (i.e. New York, Chicago, London) Amplitude has experienced world class results. He provides a deep philosophy on achieving success in the CTA industry.Thank you for listening episode #016, where we continue our conversation with Karsten Schroeder of Amplitude Capital.In This Episode, You'll Learn: Allocation of capital from a stop-loss point of view when doing short term trading Amplitude Capital's systems for trade implementation Why high frequency trading is a very different strategy from that of Amplitude Capital's"We are running 5 days a week, 24 hours a day." - Karsten Schroeder (Tweet) Risk management strategies and the framework for embedding these principles into the Amplitude Capital operations Exploring the meaning of market correlation in short term CTA strategies Karsten Schroeder's philosophy on drawdowns"When you cut a drawdown you lock in the loss and you will limit yourself in the recovery." - Karsten Schroeder (Tweet) How managers can do a better job of explaining drawdowns The role of teamwork and processes in the research cycle The internal processes for validating implementation of strategies at Amplitude Captial"We have no interest what-so-ever in hot money." - Karsten Schroeder (Tweet) Karsten Schroeder's explanation for why Amplitude has experienced such success Do financial leaders need to live in financial hubs? How living outside of the financial hubs has impacted Amplitude Capital The difference between European CTA managers and US counterparts. Why has the market dominance shifted?"Stay entrepreneurial, don't become a manager." - Karsten Schroeder (Tweet) The philosophy of failure that empowers Karsten Schroeder's entrepreneurial journey What continues to inspire Karsten to keep running the business The question investors are not asking that they should be:"...spending more time asking where the money was made and how it was made."Sponsored by Swiss Financial Services and Saxo Bank:Connect with Amplitude Capital:Visit the Website: www.ampcap.comCall Amplitude Capital: ++41-41-747 15 00E-Mail Amplitude Capital: z@ampcap.comFollow Karsten Schroeder on Linkedin"Nobody can tell you beforehand how big a drawdown is going to be. There are statistics where you can say, "well a drawdown should not be bigger than 1.5 times the volatility," but given the wrong market environment it can be bigger." - Karsten Schroeder (Tweet)

”My comment to him [Bill Dunn] was that I had a really good thing going so I wasn’t sure that that would really be the right move to make, and his response to me was, 'that’s fine, I’m not sure you can really handle it.'”
Our next guest is a partner in a firm that has enjoyed 40 years of trading success with a 30 year continues track record of their WMA program. The track record of the organization, Dunn Capital Management, is world-class. The legendary Bill Dunn offered partnership to our next guest and he replied, "I'm happy with where I am." Bill's response will make you laugh. We're grateful to have your ears for episode 009 with, Marty Bergin. In This Episode, You'll Learn: The Story of Dunn Capital and the Evolution of Dunn Capital Management How Marty began working with the firm and how he became a partner The company culture of Dunn Capital and why it's so important to their success An overview of the WMA program "It's only one number in the system, but I think, going forward, it's going to be significant in our returns" How the Value At Risk (VAR) approach separates Dunn Capital from other CTAs Why Dunn Capital manages all tasks in-house About the 30 year+ track record of Dunn Capital "We didn't make a lot of changes to the system for a number of years, and I think we kind of got behind" The big research upgrades taking place in 2006 About the change to using two separate "Algo Classes" About the adaptive risk profile (ARP) Dunn's approach to diversification across sectors (for example; 23% in agriculture and 13% currency allocation) "Basic trend following, you've got 2 parameters. Time and noise. Instead of taking one time variable and one noise variable for each market, now we're looking at hundreds of time frames and noise variables."
Resources & Links Mentioned in this Episode:
Learn about Dunn Capital's methodologies and awards. Q&A with Bill Dunn
"When we look at the adaptive risk profile, what we're looking at is: is this a good environment for trend following or is it not. The better the environment the higher the targeting mechanism is, the lower that we determine the trendiness of the market to be, the lower we adjust our target."
Sponsored by Swiss Financial Services and Saxo Bank: Connect with Dunn Capital Management:
Visit the Website: www.dunncapital.com Phone: +1 772 286 4777 E-Mail: info@dunncapital.com
"The whole concept is that everything is 100% statistical. We don't use any fundamental data in decision-making. It's all purely based on price data because there is no subjective knowledge in price data."

I am drawn to a group of investors that I call practitioner philosophers. These are people who have gotten their hands dirty in their respective fields, but despite being doers, they still often sit back and ponder the big questions in business and life. My guest this week is one such practitioner philosopher, NYC based venture capitalist Jerry Neumann. I came across Jerry's essays a year ago, and he is on a very short list of writers whose work I read without fail and almost always more than once. You can think about this conversation on business, investing, and venture capital as a big funnel. We start very broad, discussing where we may be in a large 70-year economic cycle. We then break down the so-called power law which seems to govern venture capital returns and business outcomes. Then we get even more specific, discussing Jerry's process for evaluating early stage companies, and the particulars of what might make a good venture capitalist. I say "might" because as Jerry explains often, nothing is certain, and luck may always play a huge role. I just loved this conversation. It is the type that without the podcast as an excuse would be a very odd and intense one if I were just meeting someone for the first time. You'll find no small talk or even medium talk here. This is a meaty discussion with one of the smartest and most straightforward people I've come across. Books Referenced Carlotta’s Perez - Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages Thomas Hughes – Networks of Power: Electrification in the Western Society, 1880 – 1930 Frank Knight – Risk, Uncertainty, and Profit Jeffrey West - Scale: The Universal Laws of Growth, Innovation, Sustainability, and the Pace of Life in Organisms, Cities, Economies, and Companies Links Referenced Deployment Age Oswald Spangler About Men; Corporate Man Howard Mark’s 2x2 matrix of superior investment results Michael E. Porter - How Competitive Forces Shape Strategy DJ Teece: Profiting from Technological Innovation Porter’s Five Forces Show Notes 3:27 – (First question) – Start with Jerry’s essay the Deployment Age and a look at what it means for where we sit today (looking forward as investors)? 3:40 - Deployment Age 4:26 - Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages 9:28 – What time in history can you compare our current deployment age to and what does that say about the next 10, 20, and 30 years? 9:40 – Oswald Spangler 11:09 – About Men; Corporate Man 15:36 - How have your views evolved over time and how do you square the 1950s-time period for venture capitalists? 18:06 - Networks of Power: Electrification in the Western Society, 1880 – 1930 20:40 - What lessons should venture capitalists make from these deployment age cycles 25:27 - Risk, Uncertainty, and Profit 24:10 – Exploring how powerlaws govern returns for venture capital 26:50 – Howard Mark’s 2x2 matrix of superior investment results 32:19 – Providing context and understanding to Alpha within Powerlaws. 32:56 – Nassim Taleb: Powerlaw 39:18 - Portfolio concentration and scaling 42:31 – Venture Follow-on and the Kelly Criterion (Jerry's Blog) 44:34 - How have you have actually done this, Jerry? What is your process like and your focuses? 54:00 – Are there any circumstances where it is wise for friends and family to make venture investments? 59:20 - What is this idea of who profits from innovations? 56:12 - DJ Teece: Profiting from Technological Innovation 1:02:57 – Understanding complimentary assets 1:05:06 - Porter’s Five Forces 1:09:24 - Are Augmented and Virtual Reality interesting areas for venture capital and why? 1:15:28– What makes a successful venture capitalist? What makes you special? 1:23:43 – What is the most memorable day in your career in venture? 1:26:03 – Kindest thing anyone has ever done for Jerry Learn More For comprehensive show notes on this episode go to http://investorfieldguide.com/jerry For more episodes go to InvestorFieldGuide.com/podcast. To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag

"The best way to manage risk is to spend less money." - Dave Sanderson (Tweet)Welcome to Part 2 of our conversation with Dave Sanderson. In this episode we explore his trading program in detail, from the markets the firm trades to how they describe their program to investors. We also explore the challenges that he goes through as a business leader, dealing with drawdowns, and why optimism is so important to Dave.Thanks for listening and enjoy the second part of our conversation with Dave Sanderson.Subscribe on: In This Episode, You'll Learn: Why Dave believes that QIM is a unique firm in a reasonably similar category as KFL Capital Management. How to describe Krystal to investors and why it can be a challenge. About the length of time it takes for Krystal to compute the data and make a decision."It used to take six weeks to run that [data computation]. Now it takes about a minute." - Dave Sanderson (Tweet) Why the breakthroughs in computational power are supporting KFL Capital Management to make their systems faster each year."The mathematical space is so big, it’s like searching the size of the Internet every time we make a prediction." - Dave Sanderson (Tweet) The markets KFL trades. Expected drawdown and volatility Krystal expects."What gives me comfort is the fact that we’re agnostic in terms of direction." - Dave Sanderson (Tweet) How Dave expects to deal with drawdown environments. Research cycles within KFL Capital Management and the potential for a second Krystal."Research is non-linear." - Dave Sanderson (Tweet) About the 99.3% match rate between their live trading and back testing results. The biggest challenge for KFL Capital Management in today’s market. About the challenge of attracting AUM in the modern financial landscape. Asymmetry of agency and understanding how to focus on who you’re talking to. Regarding the difficulties of explaining machine learning and big data ideas. Commonalities in the highest level due diligence explorers. Entrepreneurial perspective, great books and an open minded perspective on failures. Why optimism is such a powerful force in today’s world.Resources & Links Mentioned in this Episode: QIM The Medallion Fund - Jim Simon’s Fund. The Innovators by Water Isaacson. Zero to One by Peter Thiel.This episode was sponsored by Swiss Financial Services:Connect with KFL Capital Management:Visit the Website: www.kflcapital.comCall KFL Capital Management: +1 (416) 849-1925 x212E-Mail KFL Capital Management: Info@KFLCapital.comFollow KFL Capital Management on Linkedin"I think the great experiences go to the optimists because in life you probably find what you’re looking for and the optimists tend to look for great things and expect great things." - Dave Sanderson (Tweet)

Today, we are going to spend some time talking about the Sydney property market. Even if you’re not interested in investing in Sydney, there are some great lessons to be learned in this information. Of course, many investors want to know what is happening in Sydney. It’s Australia’s largest property market and price growth has stalled. People are wondering if now it the time to buy, sell, or hold. I discuss what’s going on with the Sydney property market with Ahmad Imam, the Senior Property Strategist of Metropole in Sydney. In my mindset moment, I share with you the secret to living longer which has been proven by research. The secret is probably not what you think. 6 Things Property Investors Need to Know Before Investing in Sydney For some, just hearing the words 'Sydney' and 'Property' in the same sentence makes them cringe. While others will see dollar signs and opportunity. It really depends on your personal experience with property in Sydney and whether or not you are an Amateur investor or an experienced investor that has seen this all before. Let's face it, we receive so much conflicting information on a daily basis from so many different sources that at the end of the day you don't know if your Arthur or Martha. The reality is, if you don't keep up with the media you are uninformed and if you do keep up with the media you are misinformed. Seems like you can't win. Don't get me wrong some points are valid and some can be completely dismissed, so let me summarize the points and provide 6 things property investors need to know before investing in Sydney. 1 – Entry Level Price for an a Grade Asset When investing in Sydney you must be prepared to pay a higher entry level price than Melbourne or Queensland. Entry level for an investment grade property in Sydney is $600K and climbing. Compared to an entry level of $400K in Melbourne or $350K in Brisbane. That's a difference of $200K in this current climate of affordability constraints and tighter lending conditions. Keep in mind you can of course buy properties for less than $600K in Sydney but they would not be investment grade assets and you would be compromising on location and as a result the long-term growth potential of the asset. Do not assume that an A grade asset in Sydney must be a house in the Eastern Suburbs on a big plot of land. An A grade asset is simply an asset that is both strong and stable. Strong in that it has wealth building rates of growth and stable in that it is in a location that does not fluctuate in value. As investors, we like to see nice, stable, linear and predictable growth. As well as detached houses or townhouses we certainly see strong and stable growth in well located apartments in small to medium density boutique complexes in Sydney. Manage your expectations and do not be afraid to buy an apartment in Sydney if that’s what your budget allows – as long as of course it ticks all the boxes. Do not also assume that a house is a better investment than an apartment if the house is 40km away from the CBD and has minimum growth potential. Yes, land is important but do not forget that not all land is created equal. Sydney is now a global city with a population of 5 million plus and as a result we are now starting to see it ‘Manhattanising’, and just like in Manhattan you can’t expect to purchase a big house on a big block, in the right location within your budget. I would much rather an average sized 2-bedroom apartment in the inner middle rings of Sydney with great growth potential as opposed to a large 5-bedroom house 40km away from the CBD with minimal growth potential. This is an investment after all so take emotion and ego out of your investment decision. 2 - Don't Just Look at Rental Returns In my experience most amateur investors look at 2 criteria when investing in Sydney property - the price and the rental return or yield. Yes, they are both important criteria and you certainly need to secure the asset at the right price but one crucial factor that amateur investors neglect is the average annual growth of the investment i.e. Capital Growth. The reality is there are 2 philosophies for investing in property. You can invest for cash flow, as in your rental return or you can invest for capital growth. One must be compromised. Ideally it would be great to have both but guess what? You can't have your cake and eat it too. Now I'm not going to go into a debate about capital growth vs positive cash flow however it's fair to say the further away you go from the CBD the more likely you are going to find a property with above average yield and you will compromise on capital growth. And the opposite applies when you invest within the inner middle rings of Sydney, you are more likely to find a property that has above average annual growth but you will likely compromise on the yield. The rental yields we see for the properties we like to buy in Sydney are approx. 3% - 3.7%, however the growth we receive on these assets outperforms the averages in growth of 7.5% in the long term. My advice is to do your research, pull out the calculator and do your numbers. If you have a long-term investment strategy then calculate the projected growth and value of an A grade asset over a 10 -20 year period and compare that to the growth and value of a secondary asset with minimal growth over the same period. You can't argue with the numbers. Capital growth is King. 3 - Do Not Expect the Same Level of Growth We Saw Over the Past 4-5 Years The last 4-5 years in Sydney has seen unrealistic levels of growth – growth well into the double digits in most cases, that have given many investors a false sense of confidence Growth has been so strong that even secondary assets in secondary locations have seen growth over the past few years – and now that the Sydney market is taking a well-deserved breather you can no longer expect this growth going forward. Sydney is a fragmented market and as a result we have seen stronger growth in the inner middle ring suburbs as opposed to outer suburbs of Sydney and this gap between A grade assets and secondary assets will start to widen more and more. And this will become even more apparent over the coming months as growth in secondary assets start to suffer and those who invested in secondary assets start to struggle due to rises in interest rates, tighter lending conditions and investors being previously on interest only loans now being forced into a principal and interest structure. Sydney’s outer suburbs are no doubt experiencing a growing population but do not assume that a growing population always equates to an increase in capital growth. You must look at the key drivers of growth including migration, spend on infrastructure, the high socio economic demographic and where they are buying as well as areas where people are willing to pay a premium to live – population growth is only one driver of growth amongst many. It is now absolutely critical that going forward you are buying A grade assets i.e. the right assets in the right locations as they will still continue to grow in the long term at realistic levels. 4 – There Is Only One Main CBD There is only one CBD in Sydney and every other “CBD” is secondary to the main centre. Yes, Sydney is decentralising and there is very clear consensus that Parramatta is being built as Sydney’s second CBD, followed by other large centres like Chatswood, Penrith, Hurstville and Liverpool to name a few, but they will not experience the same levels of long term growth as the inner middle ring suburbs of our main centre. If you wish to take a calculated risk, than you need to avoid hot spotting and speculation. Stick to the pockets that not only have the growth drivers but have shown evidence of long term growth and stability. 5 - Parking Space Is Preferred Welcome to Sydney, where we spend most of our lives behind a steering wheel. Yes, we have higher density living and better public transport than we did 20 years ago but do not underestimate the impact a parking space has on the growth of your asset. You do not necessarily need a lock up garage but at the very least you should seek a property with a parking space. A parking space will not only increase the value and long term growth potential of your asset but will also increase the chances of securing a tenant much quicker, reducing the vacancy in your property and as a result increasing long term cash flow. 6 - Sydney Airport and the Flight Path Unlike Melbourne where Tullamarine Airport is 23km from the CBD of Brisbane where the airport is 15km from the CBD, the domestic and international airport in Sydney is only 8km from the CBD and surrounded by residential suburbs. Hence why we have an airport curfew in Sydney which limits take offs and landings between 11pm and 6am. We of course want to stick to the same strategy of buying an A grade asset in the inner middle rings of Sydney metro but nobody wants a property directly underneath the flight path. So make sure you do your due diligence, no different from ensuring the property has the right aspect and that it receives relevant sun, make sure you're not being impacted by the noise pollution of being directly under the flight path. According to Sydney airport there are approx. 60,000 passenger aircraft movements per year, that works out to be an average of 164 aircraft movements per day. Given there is curfew between 11pm and 6am and flights are only operating for 17 hours per day that averages out to be 9.6 aircraft movements per hour or an aircraft movement every 6 minutes. Now I don't know about you but I don't want my dinner parties, BBQs and conversations interrupted every 6 minutes. There is nothing wrong however with being under the flight path as long as you are not impacted by the noise pollution. Mindset Moment: The Secret to Living Longer The number one scientifically proven answer to living longer is relationships. These are three times as powerful as exercise. Being part of a community and work relationships count. Links and resources: Michael Yardney Metropole Metropole’s Sydney Office Rich Habits Poor Habits Property Update App Ahmad Imam Mark Twain Quotes: “An International investor coming back to Sydney after twenty years, just wouldn’t recognize it.” Michael Yardney “You get your investment returns in four ways capital growth, rental yields, manufactured capital growth or renovations, and tax benefits and depreciation.” Michael Yardney “Stop staring at your phone and go out and hug somebody.” Michael Yardney Never miss an episode and keep up with all the good things going on at the Michael Yardney podcast by subscribing on iTunes. You can also subscribe to MichaelYardneyPodcast.com to keep up with the latest information including bonus material that comes out between the podcasts.

NPC Don Ward – 9/26/17 Hugh Ballou: Welcome to this version of the Nonprofit Exchange. Russell David Dennis, how are you today sir? Russell Dennis: it’s a beautiful day here in Colorado. A little cloudy, a little cool. It’s a great day just to be alive. Don Ward: Hugh: We have a long-time friend and another brilliant person who is in my life. Russ haven’t met him yet, but you will discover for yourself that Don has many, any gifts. We are going to talk about a special topic: We are all challenged around the topic of talking about money. We like to champion charity as the definition of what we do in the social benefit sector. The word is nonprofit is used a lot. I ends to color our thinking about money. Our guest today is Don Ward. Don Ward wears a number of hats. I know Don Ward from the CEO clubs in Central Florida, where you have introduced me to some really great leaders. Don, welcome to the Nonprofit Exchange. Don: Thank you very much. Honored to be here. As they say, whatever you honor will honor you. Hugh: Love it. There are a lo of things you do, but in this space of influencing leaders, our topic today is money has eyes. Talk about your background, your experience, and what gives you the knowledge and wisdom to present today around this topic. Don: Mistakes and great mentors. The only two ways you learn. So I would say that is what qualifies me. Probably there is a call that I am going to give you a mock version of that call later. I used to run a CEO of an organization you and I were a part of. People would find outa bout an event and go, “Oh my god, I have to be there. My credit card is maxed out. I don’t have any cash. Nobody loves me.” And all that stuff. We would just say, “Do you see yourself being there next week?” They say, “Yeah, I gotta be.” Okay. No problem. Be on a call at 9:00 on Wednesday night. I’ll give you a dose of that call a little later on. Hugh: Great. Don: But yes, I have helped over 400 companies raise seed capital on up to over a billion. I could go into a whole lo of things about what attracts money, but I will give you the coaching little bit segment there. Basically, if you have an A-level team and you have a B-level play-in, you are funded. You have an A-level play-in and a B-level team. Ain’t no money comin’. Hugh: Whoa. That’s a reality check. So you have some really good information to share with us today. We often just go back and forth in a Q&A with guests. I want to give you some space to share in a presentation mode about money has eyes. I heard you say, you kind of slipped it in, that you helped 400 companies raise capital. Is that what you said? Don: Absolutely. I don’t have it on my business card. I don’t have it on my website because I only do it for people that I know I am divinely called to work in conjunction with. Not everybody is our assignment. Hugh: Got it. We work with- Russell and I work with charities. I work with early-stage entrepreneurs. Many, many, many are challenged. This is a great topic for everyone, so I want to get out of your way. So you have worked with seed capital, and I heard you say a billion dollars. Don: Well, actually, I am sitting on two operations right now. We are in the middle of a $9.9 billion raise on one, and the other we are in the middle of a $500 million one, but we are gonna need a lot more than that before it’s done. My biggest part to bring to it isn’t just laying out the corporate engineering or the capital development, but really it’s helping people to reshape their vision and mission. If you can talk about what you can do in 15 words or less, people might hear what your’ saying, and you might actually sound like you know what you’re talking about. But if you can get it down to five words, you are powerful, probably the most powerful person at the event. Especially if it is a networking event. They ask you what it is; you want money to be asking you questions, you don’t want to be telling it anything. Hugh: That’s a paradigm shift. Why don’t you share with us about Money Has Eyes? Don: Okay. That might be my two-point oversion because the actual title is Ears. But I like it. Hugh: Ears, ears. Sorry. Don: Because you can’t receive what you can’t perceive. Mony does have to see what you ar talking about. I’m with ya. I say Money Has Ears, and I talk about money as if it is its own entity. People have it, but money is listening all on its own, and it knows exactly what it wants to hear, sense, or see coming from you. If it is smelling need or fear, goodby money. I work in a lot of faith-basd organizations as well, and people are always coming up and going, “Well, God gave me this idea, and He is going to fund it.” I go, “Okay. Let’s pretend you’re God. If you’re God and you’re looking down and you know that you are going to lean on your understanding, would you fund it? God is not going to fund it. God is as much about team as the world is about team. If you got the wrong team, the money isn’t coming. Maybe we need to reshape what your priorities are.” A lot of people say the next thing, when you ask them, is money. The next thing you need is team. The reason you don’t have money is because you don’t have the team. People aren’t compelled to believe that you can execute the plan you allegedly have. In the nonprofit sector, I think one of the big issues is always been they lead with their need. Let’s say that you have a church and you are saying, “Oh my God, we need fifty grand by Friday, or we are going to have to close this church down.” God is sitting there looking at you going, “Well, if you clos down, I am going to look bad. However, I’m not moved by your need.” God is not even moved by your need. What is He moved by? Your faith. If He is moved by your faith, and your ability to execute properly with what you have in your hand, chances are money will come. But asking, seeking, and knocking, okay. Start on your knees, but actually at some point, you have to go outside and ask, seek, and knock. If you are going to ask, seek, and knock, do you know how to talk to money? Do you understand that money has the attention span of a third-grader with ADD and a fourteenth-century classroom? Teacher starts writing on a chalkboard with chalk. Student is left the room. If your first introductory comments in your capital presentation go over about fifteen words, your investor probably lft the room mentally, too. What is that investor listening for? Well, there are thre things I belive money is attractd to: vision, passion, and team. I do a lot of coaching with a lot of different entities. Before I go on board with them, I ask three questions. 1) If they won’t die for it, I am not getting on board with them because they won’t be doing it this time next year. 2) Is it global? Anything less than that, what if, is the seed of a dream, just a cash flow strategy. Is money looking for interest on its money or multipls? Multiples. Okay. But we are going to convert this into nonprofit talk here in a second. 3) Is it socially responsible? Is it doing greater good for mankind? If those visions say yes to those thre questions, then okay, let’s sit down and talk because right there, I know you got the passion ecause you are willing to die for it, I know you got the vision because it’s global. You have permitted yourself to see beyond a cash flow. You just permitted yourself to see beyond your own ability. You have permitted yourself to see beyond your own resources. In my line of thinking, God never askd you to do anything you have the ability to do. He is counting on you ot build a team. That leads to what if there are three phases to a dream: the birth, the death, and the resurrection. Why does every dream at some point have to die? because entrepreneurs are entrepreneurs. Anything they know at all, ask me how I know. what happens is they lean on their own understanding. They don’t have mentors half the time, probably a lot more than half the time. They have no revelation of team. It’s just a matter of time before the dream is going to die. God is not worried about it either because He is not letting the dream go away. Once He gives you something, it’s yours; you’re stuck with it. It’s your gift. You can be grateful or consider it a curse, whatever you want. But the bottom line is, that’s your responsibility. You’ll have this desire at times to resurrect the dream. This time you’re teachable. Do you want to start getting into the Money Has Ears routine? I was setting it up, I guess. Hugh: Yes, sir. Go for it. Don: All right. People would come on this call at 9:00 at night, and you’re hearing all this chatter in the background. “Okay, let’s start off. Everyone on this call is here because you need to raise some money and quick. You all need to raise at least ten grand to join this organization, get your hotel, get your airfare, blah blah blah. Right. How many people like asking other people for money?” Booo. Hiss. Everybody is like, “No, I hate it, man.” “Okay. Befor you ask for money, you have to come to a place of understanding a certain element about what you’re going to do with the money. Are you raising this money in the case of this call? Are you raising this money so you can come out, you can network with the kings and queens of industry, build a team, raise capital, because your product, your service, your ministry, your charity can do great things for mankind?” All of a sudden, everybody is like, “Yeah, that’s me, man. My product is going to change the world. What I do for mankind, I am going to be digging water wells in Africa.” Everybody has a different thing. “Okay, next question. Are you actually needy in the world, or are you needed by the world?” People are having Aha moments. “Crap, man, I am needed by the world. I am needed by the world, man.” “All right, if you are needed by the world, then are you actually raising money for you or the people you’re going to serve?” “Oh. Actually I got to get this money so I can help all the people that in my heart I am going to mak a big difference for what I am bringing to mankind.” “Okay, before we finish the call or carry on any further in the call, everyone take am oment now and make that little shift. Tak that switch that says ‘I am needy because I gotta go talk to people about money’ and click it over to here where I am needed. Everyone make a shift?” “Yeah.” “Okay. Next part is going to disappoint a couple of people. Mayb it will hurt somone’s feelings. Does everyone in this call belive in something bigger than themselves?” Yeah. Pretty much everyone did. “Okay. How many of you believe the universe is going to take care of getting you your ten grand in the next couple days so you can b out there?” A lot of people go yeah. They’re cheering. “How many people believe that Jesus is going to give you the money?” A bunch of people are cheering. “Anyone believe out here that Buddha is going to give you the money?” A coupl people might say it once in a while. I am not going to say all the ones that nobody was vero n the call for. Bottom line, those people on the call did believe in something bigger than themselves. “Okay, that’s all you need. I am going to teach you how to play the game. It doesn’t matter which one of those you believe in, but you hav gotta believ in something bigger than yourself to pull this exercise off.” “Okay, that’s cool.” “if you need to hang up, hang up. No hard feelings.” “We’re all good.” “okay. This is what we’re going to do. First, we are going to do a little exercise. This little exercise, if you have ever ben in MLM, is going to feel familiar. Basically we forgt how many people we know. we know a lot of people. The thing is, w don’t know what to say to those people. We all know that friends and family support your passion and your present but seldom are they ever supportive of your enlarged tomorrow.” “Yeah, you’re right, man. Everyone is telling me I can’t do this, it’s never gonna happen, good luck, I’ll pray for you.” “Okay, that’s all right. This is what you’re going to do for an hour after this call tonight. I want you to sit down and make a list. I don’t care if you have to writ down the name of your dead second-grade teacher. Write it down. The person you met in the elevator last wdneday that give you a business card. Write it down. Any name that comes to mind, writ it down. Okay. Now what. “Now we are going to go through and grade them. A, they may have resources, they may support me. B: I don’t know if they have eresources, I don’t know if they can support me. C: Ain’t no way. What I want to tell everybody on this call is I have had people call me and say, ‘I have three As, five Bs, and like 300 Cs.’ I’d go say, ‘Go practice on a C. I will teach what it is they are going to say.’ Before I do, I have to explain about what money is listening for because we called this Money Has Ears. Money wants to know two things. If I am coming home, how much more money is coming home with me and when? IF I am not coming home, am I doing a greater good for mankind in getting a tax deduction? We have nonprofits on the call tonight?” “Yes.” “We have for-profits?” “Yes.” I am going to give you some modeling of the right language because I am going to tell you a little surprise right now. The truth is, you are not going to even ask the person sitting in front of you for anything but wisdom.” “Oh my God, I thought we were raising money?” “You don’t understand. When you re asking for money, all you ever will get is wisdom. Ask for wisdom.” “He’s probably right. That makes sense.” “Okay. Now here is where you are going to find out who you call. I don’t want you using your head to figure this out. You went through a list-building xercise. I don’t care what you do with it. Cyou can throw it away now.” “Why am I going to do all that work and fill out the list?” “I just wantd to stir up in you to remember how many people you really know.” “Yeah, okay.” “Well, here is the part of the list. This is the part of the exercise where the magic happens. You are going to go, ‘Oh Universe, Oh Buddha, Oh Jesus, whatever your claiming to be your higher power, you’re going to say, ‘Give me five faces.’ This is how long it’s going ot take you ladies and gentlemen. You take ten minues. If you meditate, you meditate. If you pray, you pray. Before you do, you just go, ‘in the next ten minues, I want you to put five faces before me, and I will call those faces in the order that you give them to me.’ There is something about lining up with your word with your maker. If you told your maker, ‘This is what I’m going to do,’ you better do it. You will call those five faces. What are you going to call those five faces for? A ten-minute wisdom meeting.” “Ten minues?” “What I am about to teach you you do not need a business plan, an executive summary. All you need to do is to sell you as being willing to die for it, that this is an incredible opportunity, and that you are building a team capable of executing the plan. You don’t have to prove any of it because you are not asking people for millions. You are asking for thousands. It’s aw hole different league.” “okay.” “Well, this is kind of how it goes, ladies and gentlemen. You are going to call up the five faces that you just got in that ten minutees’ time. I know I just met you in the elevator last Wednesday. I looked you up on LinkedIn, saw you have done a lot of things. I am moving a project forward, and I need to get some counsel from somebody that isn’t family or isn’t a friend. They all are going to be dreamkillers. I need to get a third party look at my project. I promise if our meeting goes eleven minutes, it will be your fault.’ The other person is going, ‘Number one, I just met you last Wednesday. Number two, you think I have wisdom?” Let me tell you something. I started the call with whatever you honor will honor you. Anyone who has asked you for wisdom, were you insulted? Hugh: No. Don: No? You honroed them. I sense I could get some wisdom. I was meditating this morning, and I am going, Man, I need some wisdom. Who can I call? Your face popped up of all things.” “Really? I just met you in the elevator last Wednesday.” “I don’t question it. When I ask my maker for a face and he gives me the face, I am going to go talk to the face. You’er the face. Would you honor me with ten minues of your time? I promise it won’t take eleven.” “Yeah, okay.” “To honor your time, I understand there is a Starbucks just a couple blocks from you. I’ll come to you. I’ll be there ahead of schedule. You will be out in ten minutes.” “All right, okay. I’ll come see what you’re talking about.” Next day, 2:00, just like you set up with him. You’re there early. You’re looking proessional. Money does have eyes, and if it looks at you and says, “You ain’t professional,” so thanks for that tidbit there, Hugh. We are going to add in an adiditon that money ahs eyes, too. It’s looking for something better to do. Money is always looking for something better to do than it’s doing today. It’ll go form point A to point B in the speed of thought. It has no loyalty. Money doesn’t like to keep doing the same stupid thing it did befor either. Nonprofits have a real issue if they can’t give a compelling vision of how they are learning to actually reproduce once you give them some seed. Most nonprofits are just eating the seed. They are not doing anything with the seed to grow more. There are some issues here. That would be another phon call. Here we are. Wee’re back to the person in front of you that you met in the elevator last Wednesday. Here is what you’re going to do. You have ten minutes. The first eight minutes, all you’re going to talk about is them. “Man, I’m here to have a meeting and make this money.” “No, everything flows through relationships. Let me ask you a question,” is what I used to say to them. “If you show nine minutes of undivided attention into somebody, do you think you might read one minute of undivided attention?” “Yeah.” “okay. All you need to say is going to take one minute. I am going to teach you what you are going to say in your one minute.” “Okay. All right.” “What’ that going to be? Depends on what it is you’re taking out there and what it is you are raising your capital for. Basically, it’s the same whether you’re for-profit or nonprofit. I know I just met you last Wednseday. I am so honored you are sitting here in front of me and you gave me this time. I promised you ten minutes. I have a minute and a half. I can do it in that maount of time. This is what I am working on. I have committed my life to it. I am not quitting until it happens. W are building an incredible team. The plan is getting ever-evolving. As you know, all plans change. We are so proud of our plan. Where we’re at right now, wee’re at like 10k, 10.5. 10k shy of our first phase of development. Who do you know that might be interested in digging water wells in Africa?” Assuming that that is that person’s mission. And you shut up. The first person to talk now loses. And you smile. You sit there for ten minues. They are the one holding this meeting any longer because they aren’t talking. You just smile. You sit there. They will come back. Money always says, “So what are you offering?” If you are an onprofit, that is way too easy an answer. A chance to earn some human interest, do some good for mankind, and give a tax deduction. That’s all that it’s looking for. Nonprofit money, that’s all it’s looking for. The question is, what are you offering? Is what you are doing for mankind btter than what it is presently doing for mankind? That’s only convincing to the money if it’s sold out ha you are sold out. How sold out are you? You just told them you committed your life to bringing this to pass. You are doing everything. You hav ben building this fortune-level team. You have a fortune-level plan. That’s another key word to throw in there. Those words represent that you’re professional. You’re not messing around. They are not going to stop and go, “Can I see your executive summary?” You are not talking about fifty or one hundred thousand or a million dollars. “I find three people at $333 a piece. We’re there.” If you’re for-profit, then the person is going to turn to you and dsay, “What are you offering?” You’re going to say, “We are offering a convertible promissory note. It’s saying 1% simple interest per month, 12% per year. Can you get that at your bank?” “No.” No, you can’t get anything close to that at your bank, can you? “No.” “What are you saying about a convertible?” “We’re getting ready to raise capital. During that cycle of a one-year offering, if somebody wants their money back at a payment, we will pay it back to you.” The people on the call are going, “Where am I getting the 12% interest?”

In this episode
Amazon is looking to buy Capital One, or so goes the rumour. It’s been predicted for a long time that Google, Apple, Facebook, and Amazon would get into financial services, but Amazon is the only one of those companies that specifically needs a payments facility in their core business. James Arscott, CCO of invstr, joins us to discuss this and other headlines, including bitcoin going from funny money to something legit in Japan.
We also talk to TrueLayer CEO Francesco Simoneschi on banks becoming software companies; to BBVA Open Innovation Manager Marisol Menendez about BBVA’s competition to find a new model for low interest rate banking; and BodeTree CEO Chris Myers about the three steps FinTechs need to take to survive.
News this week Business Insider – Innovative app-only banks are doing something old fashioned — lending money – Link The Telegraph – Co-op Bank puts itself up for sale as it braces for another ‘significant’ loss – Link Level39 – L39 API member TrueLayer comes out of stealth; secures $1.3m funding –
Nikkei Asian Review – Japanese megabanks raise bets on fintech – Link Finextra – BBVA seeks new model for low interest rate banking – Link Telegraph – Pay as you speak: Santander revamps voice banking app – Link Banking Technology – Amazon looking to buy Capital One? – Link Finextra – Australian banks fight back over Apple Pay ‘fantasy’ claims – Link International Business Times – Apple, Facebook and Amazon primed for PSD2 demolition of the card networks – Link Forbes – 3 Steps Fintech Companies Need To Take In Order To Survive – Link Medium – Get paid to read email from outside your network with a 21 profile – Link Are you listening to this podcast while on a nice little jog? If so, woo-hoo! We hope we motivated you. Could we ask a favour in return? Please take a sec to review us on iTunes so more people can discover us. Thanks in advance! Love, FinTech Insider.
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In part two of this series examining the forgotten life of William Mesny, we hear the second half of his story in China. We're mostly using author David Leffman's 2016 book "The Mercenary Mandarin" TERMS FROM THIS EPISODE Chéngdū 成都 Capital city of Sichuan Khampa 康巴 Area in eastern Tibet bordering Sichuan Yúnnán 云南 Southwestern province of China Huí 回族 Musilm ethnic minority Guìlín 桂林 Beautiful city in Guangxi Lí River 漓江 River running through Guilin Liǔzhōu 柳州 City in Guangxi Róngshûi 融水 City near Liuzhou Róng’ān 融安 City near Liuzhou Dānzhōu 丹州 City near Liuzhou Miao 苗族 Known as the Hmong in the US, one of China's ethnic minorities Yáo 瑶族 one of China's ethnic minorities Dòng 侗族 one of China's ethnic minorities Zuǒ Zōngtáng 左宗棠 Successful Qing era general Guìyáng 贵阳 Capital of Guizhou Chóngqìng 重庆 Formerly part of Sichuan, now a Municipality Lánzhōu 兰州 Capital of Gansu Zhìlǐ 治理 Old province of China that no longer exists Qīnghǎi 青海 Province in West China Gānsù 甘肃 Province in West China Níngxià 宁夏 Province in West-Central China Shǎolín Temple 少林寺 Famous temple in China Tàiyuán 太原 Capital of Shanxi Shānxī 山西 Province in China Bǎodìng 保定 City in Hebei Lǐ Hóngzhāng 李鸿章 Chinese military leader and diplomat and signer of more than a couple unequal treaties. Zhuōzhōu 涿州 City south of Beijing in Hebei Zhāng Zhīdòng 张之洞 Reforming governor of Shanxi Xīān 西安 Capital of Shaanxi Qínlǐng Mountains 秦岭山 Mountain chain in southern Shaanxi Kūnmíng 昆明 Capital of Yunnan Dōngjīng 东京 Eastern Capital. Can mean Tokyo or Tungking (N. Vietnam) Anhui 安徽 Province in Eastern China Hefei 合肥 Capital of Anhui Guǎngxī 广西 Province in southern China Xinjiang 新疆 Province in northwest China Shaanxi 陕西 Province in north-central China Huangxing Road 黄兴路 Road in Hankou The Mercenary Mandarin - amazon link to the book Link to Blacksmith Books Link to one of Mesny's Chinese Miscellany (Vol IV) Link to John Pomfrets book "The Beautiful Country and the Middle Kingdom"

What follows is an edited transcript of my conversation with Judy Stephenson. Petersen: You're listening to Economics Detective Radio. My guest today is Judy Stephenson of Oxford University's Wadham college. Judy, welcome to Economics Detective Radio. Stephenson: Thank you very much. It's nice to be here. Petersen: So, our topic for today is economic history. Specifically we’ll be looking at some interesting research Judy has done on wage rates in the early modern period in London. This period is particularly interesting because it's the start of the Industrial Revolution which leads to a dramatic increase in the growth living standards and of technology and that trend of course is what has shaped our modern world and made it different from the world of the past. So, it's very important of course to understand this period if we want to understand the world as it is now. So Judy, start by giving us historical background. What was the world like in the period you study? Stephenson: Well, I work mostly on researching London, so urban environments. And London is very developed in this period between about 1600 and 1800. And London becomes the biggest city in the world during this period and as the biggest city in the world it's hugely vibrant, some of the largest merchant houses in the world are there, banking is advanced and developing. Most of the occupations of London are tertiary or service sector, even at this early date. The river is a huge source of both transportation and work, the port is where much of the capital, both physical and financial, from around the world comes through the city, and the professions and bureaucracy are well established in London in this period. It's growing at all levels of society, from the very poorest to the very richest exponentially. So, if you look at the population growth overall in the U.K. in the late 17th century from 1500-1600 to 1700, that actually is pretty much stable or slightly declining. But the population of London grows by a third or something in that period. London is this hugely vibrant commercial social and cultural center and it's pretty much overtaken Amsterdam, which has come to the end of its golden age in the mid 17th century, right at this period. So, although the world more generally and in a wider sense can be typified by pre-industrial or agrarian values, London is very commercial in this period. Petersen: Okay, so, if I were to get in a time machine and go back in time, maybe London would be more familiar to me, would seem, feel more modern than almost any other place. Stephenson: I think it would be very familiar to you the way of getting around would be a sedan chair or a carriage. You can hire them on the street, in fact you send your boy out to get one. It looks very like Uber, it's a gig economy. And most people working in unskilled, or who didn't have a trade or didn't have a profession or skill probably didn't have steady jobs. They thought of themselves as having work that they could rely on, but it wasn't wholly reliable and they definitely didn't have a contract that would keep them going, they probably didn't have many rights either. And they probably worked at two or three things and everything---the traditional literature about London in this period is one of inequality. So the very very poor literally scavenging on the streets among the smut because the streets were the sewers in those days, and the very very rich living in these incredibly grand environments with retinues and servants. It's a golden age for the aristocracy after they had a pretty rubbish time in the 16th century. It's a golden age for the aristocracy, it's a golden age for art, for architecture, for all these things but it is also a period of desperate poverty and mortality. The plague doesn't die out in London until the end of the 17th century, but still very very high infant mortality and living standards are nothing like they become in the later 19th century, after they sorted out all those things. But from a commercial point of view, you might well recognise it. Petersen: It's very interesting---and of course the whole period is interesting---but it's particularly interesting for what it becomes, really. The rest of the world starts becoming more like London, starting in this period. Stephenson: Yes. Petersen: And so you study wage rate of some of the day labourers and the workers in that period. How have economic historians gone about measuring things and getting data that far back in the past? Stephenson: Well, data on wages and prices for this period was originally gathered by a guy---Thorold Rogers---who was a 19th century historian who started collecting wages and prices in the mid 19th century and finished 40 years later, literally a broken man. These are seven volumes from around England and he basically went into any long run institution where there was an archive or records, as they were called in those days, and just noted the quantities and prices found in the books. But it was a huge project way before the days of even print noting, before the days of an efficient typewriter, let alone a computer. It was pretty haphazard as to what he was actually recording but it's very accurate. But he tended to take down labour costs or wages as day rates, and what he mostly found were builders because he was in big Oxford colleges and places like Westminster Abbey which had buildings from the 13th century and had required a lot of building maintenance and surprisingly he didn't find many other wages. So this way of recording had a sort of half dependence. These day rates because they were the only ones that people could find it was assumed that wages---wage rates are very hard to find but there's always good ones for builders---and it was assumed that builders were the same everywhere in terms of skill levels so these could be comparative. And Arthur Bowley---who is known as the father of modern statistics, an economist and statistician again working in the end of the 19th century and in the early 20th century---used builders in his first attempts to think statistically about an average wage, an average worker, and to establish a real wage. And Bowley’s work is absolutely seminal in the history of statistics, econometrics, and economic history. And he used Rogers' and others' wage rates of builders. And this tradition carried on as other historians gathered more rates, like Elizabeth Gilboy in the 1930s, and then Phelps Brown and Hopkins used all these people's data when they came up with the seminal Seven Centuries of Building Wages in 1955. And what Phelps Brown and Hopkins had done was they took all those day rates from the builders, and then they took a series of wages and prices and they created a basket of goods and they offset the wages against the prices and they came up with an index of the real wage or living standards across the ages. And this has been the standard for measuring welfare since 1955. And because it's very difficult to find wage rates for the 18th century for some of the reasons I spoke about a minute ago---not many people have jobs, etc etc etc---the dependence on builders' wages continued until, with the most amazing econometric and advanced econometrics techniques that Greg Clarke and Robert Allen were using, they still use that data from the 1930s. I think the latest good index Jeremy Boulton made in the early ‘90's, where he collected about 2,700 observations of wage rates. The key thing to remember here is all of these wage rates came from bills in the archives of the institutions. So they’re not really wages. In fact they are not wages at all. So, I don't know if you've ever worked for somebody and been charged out by the day, have you? Petersen: I have not, but my wife is charged out, she works in data science and yes, she gets one wage and she's charged out to other firms at a different rate. Stephenson: And what she's charged out is higher, right? So, when I worked in advertising, I cost my clients about 1,800 pounds a day, I saw about 350 of that. What a bloody enormous margin, actually. You got to look at how IPG were not making a really stonking profit on that but you know there's overhead and those kinds of things. Well, in the 18th century everything, but particularly in the building trades, that's exactly how you dealt with masons or bricklayers or carpenters or labourers. And any economy that has to organize production---and the building they were organizing was pretty big, the Great Fire of London destroyed the old city and was completely rebuilt in about a decade---there's some serious organizational coordination mechanism problems of making all that stuff happen. And the 18th century way of doing it is contract it out. Firms are a series of sub-contracts and so the way wage rates have been collected were the sums that were paid to contractors and what those contractors pay their men were substantially lower than those wages that Phelps Brown and Hopkins had used, or Robert Allen had used and Rogers and people have recorded. Petersen: Okay. In your paper you mention Robert Allen and he had a hypothesis that based on these faulty rage weights that high wages in London were a contributing factor in kicking off mechanization in the Industrial Revolution. So, can you talk a little bit about that hypothesis and how your new look at the data has, I suppose, called it into question? Stephenson: Yeah. So, Allen has made the most seminal contribution to the study of the Industrial Revolution. So, the Industrial Revolution is the savored big debate in economic history really and it's a favorite big debate for lots of parts or disciplines within economic history. The history of technology people like it because of the gadgets, the history of macroeconomics and supply and demand people like it because of the factor prices, the history of the organizational people and sociological people like it because of the institutions in the factories. So it has this broad appeal for everybody who's interested in the economics of the long run. Essentially, the core issue around the Industrial Revolution is it's unexplained. Why did it occur in England before anywhere else? It's this naughty problem that had never really been adequately explained until the early 2000s. Then there were two competing---well not two competing but two complementary---explanations by sort of giants of economic history in the same period. So, Bob Allen explained it through England being a high-wage economy and Joel Mokyr explained it through a series of innovations and enlightenment and how that brings about sort of an intellectual enlightment in scientific innovation. Allen’s theory was the economists’ theory and still is. And essentially what he proposed is that the high wages of England incentivized the owners of production to substitute capital for labour. Essentially because of the way series are constructed when you take all those comparative wage series of Amsterdam, London, Milan, Florence, Madrid, Antwerp, Strasbourg, when you sort of put them all together as a real wage series in the long run, the English wages looked substantially higher by comparison, particularly after 1650. It looked like the cost of labour for capital in England was much higher than it was in the rest of North Western Europe or Italy, where you had the traditional textile industries and banking, where there was some quite advanced commerce in places. Allen argued that the high wage economy first of all created those incentives but that also it had created higher human capital and skills, attracted capital to it, to prepare England for industrialization in the long run. But that the trigger was induced innovation through relative factor prices. And part of his theory also was that coal was cheap and available in England, which is very hard to argue that it wasn't, the coal in China is in Mongolia, the Dutch don't have any they've got coal in the Ruhr, of course. But you know coal has been at the center of English energy requirements for a very long time as Tony Wrigley has written about in a very distinct way actually in a lovely book called Energy and the English Industrial Revolution, which is the kind of thing your children could read. So the relative factor prices between energy and capital and labour were unique in England is Allen’s argument. So, obviously if you find out that the wages are 20% to 30% to even 40% lower than Allen thought, that presents a problem for that theory. Petersen: I believe I heard once that Germany had coal but it had to be transported over land and so was as good as useless to them before the age of the steam engine and trucking. Coal is really important. And so Robert Allen felt that high wages in London and in England were important but it seems like this issue of measuring the contract rate instead of the wage rate casts doubt on that, or even---does it close the whole gap between London and the rest of Europe? Stephenson: Good question. And that really depends on what sort of organizational form or coordination mechanism was in place in other countries. So,I've looked into this with Amsterdam and Antwerp quite a bit already. I've done some work with Heidi Deneweth who works on the Low Countries on economy and building particularly. She's at Ghent. And we're finding in the way that building is organized in Amsterdam, in London, is that in London very much the state has completely outsourced everything. So, the city doesn't employ people directly, that's too much hassle. It seems like the cost of management to something is very high in England because they outsource everything: the navy, the supply, the whole thing. Bits of the navy are integrated into it, but a lot of it, particularly the supply to it, is outsourced and all building is outsourced. Whereas in Amsterdam the city still employs people who are digging dikes, and looking after canals, and doing maintenance work on public buildings. Whereas in London the comparable projects which would be stopping London Bridge from falling down, or wharfing the fleet ditch and making these canals and things. Those are given to large contractors and the contractors are solely responsible for labour. Whereas there is some relationship between labour and the city, people are directly employed in Amsterdam, this is indicative only and we need to do a lot more work on comparing contracts in the same types of organizations. And then there's a guy called Luca Maccarelli, who is an established Italian historian of the building industry and industry in Milan generally and he has looked at some of the data for the wages for Florence and Milan particularly and he has shown that the day rate was only part of the wage there. In fact the contractors were throwing food, bonuses, cash savings, access to places to stay, and all sorts of perks at workers to try and induce them to work. So the wage in Italy was probably a little bit higher. In fact, Mark Reilly has said that we've understated Italy’s by 15-20% and then the person who's done the most work on France so far is Vincent Geloso, who's shown that the Strasbourg wages are probably problematic. But all this comparative stuff is at a really early stage. And we need people to get out into the field, the way I've been in the field in London, and look at more the form of employment and the form of the wage in those places. And really understand, the figures that we've got are they real or have they got other sort of recording factors like I've shown in London? So it's too soon to say although we started work on that. Petersen: So, for the modern era we have people collecting data and they're making a big effort to collect the same data across time and across place. Surveys asking the same survey question to everyone, or government data and making sure it's collected in the same way every year but when we're going back to the past, of course there was no one in the year 1700 collecting data on Italy, and London, and Amsterdam, and all these different places. And so we have to stitch it together from what is available and often that's very different datasets. Stephenson: Exactly, and different types of records. So, it may be the case that all the records are a bit skewed and you know there'll be a new schema once we have all the new data together that does reproduce the Allen’s story. And remember that we need to take the prices of goods into account. It's a real wage calculation he's done not just a nominal wage calculation. But until we've done that, what we do know is the living standards in England were not what Allen thought at the moment but you've got to do the whole comparative thing to know. Petersen: So, how do you distinguish the skilled from the unskilled? How do you make sure you're comparing the same kind of labour? Stephenson: That's a good question. Traditionally pretty much everywhere in Europe we've gathered two types of wage: a skilled wage for what we call craftsmen and craftsman are people who have completed an apprenticeship, who are qualified, that's the idea. So, a mason who has studied seven years in England---doesn't seem to be as long anywhere else---or a carpenter who has studied in the long run. So, who has invested time in the development of the human capital and acquired skills and then we think about the unskilled person as a counterpoint as being the labourer. And this is another important distinction because you know building labourers are actually of two kinds: there's the completely unskilled guy. Actually there are three kinds: there's the completely unskilled guy who's basically just handing them nails or wheeling a barrel around. But then there's the more skilled or semi-skilled assistant who actually is doing a lot more than that, who is preparing the work for the craftsman, who knows which tools go with which materials and who is fully assisting a craftsman and they couldn't really do the work without them. And you call that semi-skilled. And then there's a labourer who is hired really for their brawn. They've got a premium for being extremely strong and what you tend to see in building accounts is people who are actually hired by the load. They get 2 shillings and 8 to move a ton over a day or something---and probably need more than one man to do that---but so there's a brawn premium in these labourers or unskilled. And actually from Phelps Brown and Hopkins onwards we've taken this semi-skilled or brawn wage to be the unskilled wage, but these people aren't unskilled. Whereas the unskilled, the guy wheeling the barrel, or just picking out nails was paid a lot less than those. So, if the rate for the semi-skilled guy was 18 pence a day in 1700, the rate for the unskilled guy was 12 to 14. So you can see there's a considerable premium in here. That's another thing that colours our understanding of welfare because usually it's the unskilled or subsistence wage that the macroeconomist is interested in. They relate unskilled and subsistence even though they maybe should not. It's that unskilled wage that is an indication of supply and demand in the labour market, and the draw of that. So taking building labour to a semi-skilled to be unskilled leads to some problems because it implies that unskilled people in London could afford four times the subsistence basket of welfare goods in 1700, when actually they could barely afford two. So, if you're going to use a welfare basket these rates have a real issue and the distinction between skilled is… Petersen: So, the reason maybe we care more about unskilled wages is because that's the wage that you'd expect to see in other places in the economy. For instance unskilled work in agriculture or working in a shop or things that we don't have data for we can sort of guess because presumably there's a labour market and people have mobility and if there was too big a gap between wages for different unskilled jobs then people would move, they’d arbitrage away that difference. So your paper, it has some sort of case studies. You have data from particular construction projects. I thought those might be interesting to go through. So, one of them is the reconstruction of St Paul's Cathedral after the Great Fire of London, which is a massive project, could you talk a little bit about that? Stephenson: Well, yes it's a famous project because the old St. Paul’s had stood since I think the 14th century. It was this you know cultural and emotional symbol for Londoners apparently, and it had been redesigned---the front had been redesigned---by Indigo Jones, the kind of father of classical architecture in England. And it was completely destroyed by the fire and this was a sort of symbolic task to rebuild and so Christopher Wren hailed the King, came up with the design and you know Wren is pretty much the father of modern architecture and he's this enormous intellectual as well as architectural figure, he's very much part of the enlightenment. So the project lasted about 35-40 years, so they declared it finished in 1711 and the Great Fire was 1666 and it's still there today, absolutely intact, it survived the Second World War. So it's this incredible and very emotive building. The interesting thing from a work point of view is it's very much a craftsman's building, it's not an artist's building. So there is sculpture there, there is painting but nothing like a European cathedral like St. Peter's, St. Paul’s is very much a display of English craftsmanship and baroque style and most of it is stone faced. So, I have these wonderful papers, which are the day books of one of the Master Masons, one of the contracting masons who built the south west tower on the west front. His name was William Camster, his father was also a contracting mason on a separate contract and in the network of masons who served, ran and worked. We’d ran over 30 or 40 years and he was on site for about 10 years of the project from 1700 to 1709 or so and some after and I have his day books right, years of this, where he records every single man that was working for him and what they paid him. So, it's got an appeal because you can go and see what they did---which is very rare---working on the 18th century that you get some wage records and you can actually see the product as well. So, it's quite nice from that point of view. So, from an economist's point of view the interesting thing is the way that they contracted the construction because they just started out one contract at a time and then if it worked, they’d go "Yes. We'll do that again." So, they had these repeated idiosyncratic contingent claims contracting going on and on and on and obviously disputes arise and they resolve them, or people drop out and they get new contractors. But the whole thing is basically on a rolling contingent claims contract what Oliver Hart and Holmström said could never happen. Oliver Williamson would have had his head in his hands. But the other notable thing is that the contractors financed this really because the Crown didn't pay them. It did pay them but the Crown and the city, they leveraged the coal tax but mostly people waited two or three years on contracts to be paid. So, the cost of financing that was just swallowed up by the contractors, it was in the price. And that's one of the reasons why you see a margin on labour and materials. But the interest costs for St. Paul's were as a total of the entire bill over 35 years about 20%, and very little of that had been lent by citizens and the city, a lot of that had come from the contractors themselves through just rolling over bills. Petersen: That's interesting. So, we know not only what they were paying their day labours, but also implicitly we know the interest rate for that time. Stephenson: We do. Yes, 6% for to and from the cathedral. Six percent on an annualized basis. Stephen Quinn and Temin and Voth have found higher rates, above 8% for some private lending around the same time. And it is likely that these contractors will have had to have done some private borrowing or lending within their networks to keep rolling this finance over. Because they will have bought the stone, they will have paid the carter, they will have paid the labours who are working for the carter, they will have paid the craftsman, so they may have well have to borrow to do all those things but 6% is what they got from the cathedral. But the real question is then, so these networks of supply chains are surviving on that kind of finance. So really big contracts essentially on a very high level of trust or a very high level of interest. We need to do more work to find out which, but it does seem like these networks---because they repeatedly contract---they have good information and it's more effective than you would imagine those types of contracts to be. Petersen: And of course they're contracting---it's the government paying for it ultimately right? Stephenson: Yes, and it's financed through the coal tax which is also interesting. Bearing in mind the price of coal is relevant to development at this time. The coal tax was levied at a shilling a cauldron after the Great Fire to rebuild the churches for the city and then it was maintained through and into the Georgian period by parliament who kept sort of either adding to it or continuing it and apparently it was detested and greatly avoided. But we definitely need some more research on how this work, and how people avoided it, and and what it did to coal consumption. Because you find in the accounts that the coal tax, they're expecting this much per year from it and consistently about 10 to 15% less comes in. So they have to turn to the city or to commissioners and people who might have money to borrow from them and tide it over. So financing the thing was unconventional. Petersen: So, we usually think of government debt as being highly safe at least in the modern period but back then it may not have been. Stephenson: Yes, and I don't know what the connection to other Treasury things are and Bank of England and everything. At the time it looks like it's just private between St. Paul's and the commissioners for St. Paul’s and either citizens or contractors and that it wasn't actually securitized as a state promise, but there may have been connections. It's something I haven't delved into enough. Petersen: So, another construction project, in this case it's a maintenance project, is the famous London Bridge which of course in the nursery rhyme "London Bridge is falling down" which apparently was true. Can you tell me a little bit about that? Stephenson: So, well London Bridge was it was built the end of 13th century and it's 19 stone piers across the Thames. It must have been the most fascinating and amazing structure, it stood for pretty much 500 years, but by the end of the 16th century in the early 17th century it is falling down. And the Thames because this sort of development further up river as well, the Thames is actually a very strongly flowing tidal river at this stage and the force of the water force through those 19 piers is wearing away. So they built wooden starlings, so they built a wooden constructions they look like boats around the piers, trying to guide the water through and these of course made the problem worse and they made the waters faster. So to pass under the bridge in a boat at high tide apparently you could drop 10 feet through the rushing rapids beneath. So you pay the shootsman who was contracted by the bridge to guide you through the piers. And it was really quite dangerous. So, the bridge has a number of maintenance problems: the first is the starlings the mason repairs. The second is until the mid 18th century the bridge was covered in housing just like Ponte Vecchio in Florence as a proper living bridge the housing was also in a state of disrepair and some of it owned by the bridge and some of it owned privately. So the bridge tried to take over the property that isn't theirs and then get rid of the housing that isn't working, it's falling into disrepair over this period. And there's a guy called Mark Leighton who's written a brilliant thesis at the University of Leicester all about how the bridge masters and the City of London get rid of the housing in the mid 18th century. But essentially the bridge is the only crossing from side to side, from north to south or vice versa until 1750. There isn't another way to cross the Thames. There was a little wooden bridge up in Putney in 1729. London Bridge it's got all of the infrastructure of London basically. And so it's hugely congested and falling apart. So, the maintenance bills are are huge. Oh yeah as well. So as well as the starlings you then have water wheels which are basically bringing the water from the New River Company and the Thames to give water to the city. So those are also in operation, these whole teams of little engineers looking after the water wheels. So it's a really busy bridge it's got people scrambling over it all the time looking after it, not before the shootsman or anybody else doing any work on it and those people were paid not very much. The master craftsmen were paid for their contract and got a really good rate for looking after the contract, and then they hired others piecemeal so they'd hire well-known carpenters or masons. But they'd never have regular days or regular work and then the labourers were paid by the tide. So at high tide you could work on the bridge or you could work on the upper bits of the bridge if you were in a boat; at low tide you could access all those damaged starlings and piers. So at low tide they worked in boats and that meant that in the winter you might only get four tides in the week depending on when the tide and the light coincided, in the summer you could maybe get 11 and then when they didn't need any work done you wouldn't get any tides at all. So, there were quite a number of people. It varied from teams of 12 to teams of 80 or so who were employed in this fashion in a piecemeal just waiting for a little sort of bit of peace work on London Bridge. So, it's an interesting bit of contact with the sort of materiality of the world as well, everything was literally ruled by when the water came in. Petersen: Right. And since it's such a long period of time, I suppose you can get a decent time series of that change in the wages over that period. Stephenson: Yes, from a labour economist point of view, one of the fascinating things about the 18th century is this persistence of rates, particularly for labourers, it's a very monopsonistic market it's a classic monopsonistic market. It's a wage posting. One where employers basically will see who will come at this set wage and what happens is they don't change the wage. The fluctuation happens around the number of days worked. So people don't turn up, or don't get work when there is less to do. The number of days fall away and when there is high demand, an upward-sloping curve, the number of days go up for everybody. But a transaction cost analysis would suggest that the 18th century employer understood the costs of such information very well indeed because they weren't going to have any asymmetry of information. They were going to post ‘this is what you get,’ particularly the unskilled hand and the time or the amount of work that you got was how the fluctuations and the dispersion occurred. So there's a lot more work to be done on that because nobody's really ever looked at this kind of market in those modern terms, understanding it as monopsonistic or having search or information costs. And it's only with these levels of micro data that we can begin to understand that it might have worked like the labour market we know. Until about 20 years ago people thought---until much more recently actually, the last paper I can see about this is in 2007 by Leonard Schwartz---that essentially before 1840 it's a market dominated by custom not by market forces. But on a micro analysis it looks very much like there are just the kind of market forces at play that we understand today. So, wage posting at the lower level, a little bit of wage bargaining at the skills level, and supply and demand do actually equilibrate but not through the rate, through the number of days worked, which of course brings about the income. Petersen: So, the third construction project you discuss is the Westminster Bridge, which I suppose is that that second bridge you mentioned earlier. Stephenson: Yes, the second bridge, the cross rail of the 18th century. Petersen: Is that interesting from an economic history point of view, we have a lot of data from that? Stephenson: You get less data because I don't have anybody's nice little book saying who came in and on which day, so I don't have the number of days' work for Westminster Bridge. The interesting thing about Westminster Bridge is the different kinds of contract. Everybody, they were making contracts for hundreds of thousands of pounds with the masons and engineers and they also had a contract with a guy who had a horse and three piles for 27 pounds for the year. So, you've got this variation in value or risk from a financial point of view which is quite dramatic. But the key thing is that at Westminster Bridge you find the tide and the day model as well. So a much smaller number of days than you would expect that are actually billed to the institution, but this means of paying by the tide, which protects productivity from an employer's point of view. So that also occurs at Westminster Bridge. And what you find is that people are doing quite advanced and quite dangerous work, but without the danger money. They were given gin instead. So they sank caissons, this is one of the earliest uses of caissons designed to create the piers. So these things are experimental to say the least, and they put people in diving gear into the caissons and it must have been terrifying, you know, what if the stuff gave way and they went under the Thames. In February, because that's the time you want to be in the Thames! You know, in 18th century diving gear. And got them to work on the masonry or on the carpentry on the bed of the river for the same rate as you could be having quite a nice comfy time carving out something simple, or doing some basic maintenance work on a couple of windows on some bridge houses. So, yes very dangerous work. There seemed to be a lot of skill available, ready to do that work at those kinds of rates. Petersen: So, where do you see this research program going in the future? Stephenson: There's obviously an issue about the rate of welfare, the real wage and welfare in the 18th century and to be honest if we're going to make a serious contribution to that, we need to start looking at people who aren't builders. I've started a project with the Cambridge Group for the History of Population and Social Structure, where I spent a year before I went to Oxford, on London occupations. Because that Cambridge group, they are the masters of working on occupational structure in the long run in England and we are sampling institutions that bought goods and services widely. And the kind of bills and the kind of businesses that they deal with to understand what sort of people were employed where. So, to try and get some welfare and some wage data beyond builders that we can normalize and use properly. I think the second direction for this research is to understand how labour markets worked. Was there such a thing as custom? Because one of the old things we believe about the Industrial Revolution, and this idea doesn't really stand up anymore, but it's something that's still emotionally alluring for a lot of people, we see the Industrial Revolution as that sort of capitalism thing and our version of capitalism got going. But if people already understood transaction cost economics, and Christopher Wren writes like Oliver Williamson sometimes, then maybe the market didn't start then, maybe they already had a view of the market. And there are some organizational things that we need to be looking at from that point of view. Essentially the 18th century will always be interesting because it is a free market. It is unregulated, there's no corporation tax and the finance is not state controlled at all. This is before the gold standard, this is before states get interested in managing money in a big way. There is monetary policy but it's not in the same way we conceive it now. And so labour and capital have a relationship that is unencumbered by the state, by government, by regulation. So what is the outcome of that? Was it a race to the bottom, was there any equilibrium, what happened? So, there's a contribution to be made to studying that as a sort of a history of ideas thing as well. It's hugely rich but those are broadly the three things that are on my agenda right now. Petersen: My guest today has been Judy Stephenson. Judy thanks for being a part of Economics Detective Radio. Stephenson: Thank you very much. I very much enjoyed talking to you.

In this 175th episode Laszlo gives the great Northern Song jack-of-all-literary-trades Su Dongpo the once over. This isn't meant to be a deep dive into the reasons for all his renown in literature, calligraphy and painting. Instead, this is just a "popular Chinese historical" overview of who he was and the times he lived in. And for those who never heard of him, this is a good intro. In America we have Washington Irving, Mark Twain, Hemingway and so on. In China....Su Shi would be mentioned when rattling off their best of the best. He was definitely a major guy not only in the Song, but in the overall world of Chinese culture as well. The list of terms from this episode is particularly long this time. You can see them below in the approximate order of their mention. If you're interested to check out some of his poetry, here's an amazon link to a book of his poems translated by Burton Watson: Selected Poems of Su T'ung-P'o TERMS FROM THIS EPISODE Ouyang Xiu 欧阳修 1007-1072 Northern Song statesman, historian, calligrapher, literatus extraordinaire Wang Xizhi 王羲之 Called arguably the greatest Chinese calligrapher Zhou 周 1046 BCE - 256 BCE Ancient dynasty of China Han 汉 206 BCE - 220 CE Ancient dynasty of China Jin 晋 265-420 Ancient dynasty of China Sui 隋 581-618 Ancient dynasty of China Tang 唐 618-907 Ancient dynasty of China Song 宋 960-1279 Ancient dynasty of China Kaifeng 开封 Capital of the Northern Song dynasty 960-1127 Northern Song 北宋 960-1127 Huizong 徽宗 The Northern Song emperor who "lost China" to the Jürchens Su Dongpo 苏东坡 1037 - 1101 Our subject in this episode Su Shi 苏轼 Su Dongpo's birth name Tang Song Ba Da Jia 唐宋八大家 "Eight Great Men of Letters of the Tang and Song Dynasty Han Yu 韩愈 768-824 - Tang essayist and poet. Major influence in development of Chinese literature Liu Zongyuan 柳宗元 773-819 Tang waster of prose and poetry Su Xun 苏洵 1009-1066 - Great man of letters and Father of Su Shi and Su Zhe Su Zhe 苏辙 1039-1112 - Brother of Su Shi, also a great man of letters Wang Anshi 王安石 1021-1086 - Song statesman and father of far reaching reforms. Also a great literary figure in his day. Zeng Gong 曾鞏 1019-1083 - Great prose master of the Song Hangzhou 杭州 Capital of Zhejiang and of dynasties past. Su Dongpo served there twice Zhejiang 浙江 Province in east China Meishan 眉山 City south of Chengdu, birthplace of the Three Su's, Su Xun, Su Dongpo and Su Zhe. Min River 岷江 Yangzi tributary river in Sichuan, famous for the Duijangyan irrigation system Leshan 乐山 City in Sichuan Ya'an 雅安 Great tea city near Chengdu in Sichuan Chengdu 成都 Ancient capital of Shu Kingdom, now capital of Sichuan jinshi 进士 The highest degree that allowed you to fill the top positions in government Wang Fu 王弗 1039-1065 - First wife of Su Dongpo Henan 河南 Province in north China where it all began doucha 斗茶 "Tea Battles" that were popular during the Song Wang Runzhi 王闰之 1048-1093 2nd wife of Su Dongpo Su Di 苏堤 the Su Causeway across West Lake in Hangzhou Xin Fa 新法 The New Policies championed by the Shenzong Emperor and Wang Anshi Shenzong 神宗 1048-1085 - Northern Song Emperor and Wang Anshi supporter Sima Guang 司马光 1019-1086 Conservative Song scholar and official, writer of the Zizhi Tongijan Luoyang 洛阳 City in Henan and former ancient capital of past dynasties. Cheng Yi 程颐 One of the pride of Luoyang, Chinese philosopher Zizhi Tongjian, the "Comprehensive Mirror in Aid of Governance" A monumental historical work covering Chinese history from 403 BCE to 959 CE Wutai Poem Incident 乌台诗案 In 1079, a poem by Su Shi got him in trouble and exiled fron the capital. Huangzhou 黄州 Former name of Huanggang, now a district of that city Hubei 湖北 Central province in China, capital is at Wuhan Huanggang 黄冈 City just east of Wuhan in Hubei Province Dongpo 东坡 Eastern slope Dongpo Jushi 东坡居士 Dongpo, the retired scholar or Buddhist. Chibi Fu 赤壁赋 Ode to Red Cliffs, famous poem by Su Shi Hou Chibi Fu 后赤壁赋 The Later Ode to Red Cliffs, famous poem by Su Shi Nian Nujiao Chibi Huaigu 念奴娇赤壁怀古 Remembering Chibi, Su Shi's third poem in this series about Red Cliffs Zhuge Liang 诸葛亮 Great Shu-Han strategist during Three Kingdoms Period Lu Su 鲁肃 Politician and general who worked for Sun Quan Zhou Yu 周瑜 One of Sun Quan's main generals Cheng Pu 程普 Another of Sun Quan's main generals Sun Quan 孙权 Emperor of Eastern Wu, one of the Three Kingdoms Liu Bei 刘备 Emperor of Shu Han, one of the Three Kingdoms Cao Cao 曹操 King of Wei, one of the Three Kingdoms Fu 赋 One of the three main types of Chinese Poetry, like rhymed prose Ci 词 One of the three main types of Chinese Poetry, like lyric poetry Han Shi Tie 寒食帖 Su Shi's most famous calligraphic work, now hanging in the National Palace Museum in Taipei Huang Tingjian 黄庭坚 1045-1105 artist, scholar, official, a great Northern Song Master Mi Fu 米芾 1051-1107 Great Song painter and calligrapher Cai Xiang 蔡襄 1012-1067 One of the great calligraphers of the Northern Song Song Si Jia 宋四家 the Four Great Calligraphers of the Song Han Shi 寒食 is the holiday that occurs right before Qingming in April Yan Zhenqing 颜真卿 708-785 Great calligrapher of the Tang and one of the greatest of all time Zhezong 哲宗 Northern Song emperor, Reigned 1085-1100 Empress Dowager Gao 高太皇后 1032-1093 Empress of Northern Song emperor Yingzong, regent for Zhezong during his minority. Dongpo Rou 东坡肉 Dongpo Pork Zuo Zongtang 左宗棠 Hunan-born general from the Qing, the man who brought us General Tso's Chicken Lou Wai Lou 楼外楼 Not the best restaurant in Hangzhou but one of the most famous. Been around over one hundred fifty years Ni Zan, the late Yuan-early Ming painter. Xu Wei, the Ming painter Yuan Mei, the Qing dynasty scholar and artist. Yuanyou era 元祐 Conservative era in Emperor Zhezong's reign that lasted 1086 to 1093 Huizhou 惠州 City in Guangdong where Su Dongpo served a stint Hainan 海南 Island province off the coast of Guangdong Danzhou 儋州 Coastal city in Hainan just west of Haikou Haikou 海口 Capital city of Hainan Dongpo Shuyuan 东坡书院 Wang Zhaoyun 王朝云 1062-1095 - 3rd wife of Su Dongpo Changzhou 常州 City in Jiangsu Jiangsu 江苏 Coastal province just north of Zhejiang Cai Jing 蔡京 Long serving chancellor to Emperor Huizong Cai Tao 蔡绦 Son of Cai Jing who had the audacity to say something nice about Su Dongpo Shi 诗 The word meaning all Chinese poetry but also a specific kind as well. Su Men Si Xueshi 苏门四学士 The Four Scholars at Su Shi's Gate Zhang Lei 张耒 1054-1114 One of the four scholars famous for being part of Su Shi's gang Chao Buzhi 晁补之 One of the four scholars famous for being part of Su Shi's gang Qin Guan 秦观 1049-1100 - Northern Song writer and poet. Also one of the four scholars famous for being part of Su Shi's gang Jin 金朝 The Jin Dynasty of the Jürchens 1115-1234